NIRP Officially Arrives In The US As JPM Starts Charging Fees On Deposits

Tyler Durden's picture


Technically, NIRP arrived in the US back in December when as the WSJ reported at the time, America's largest banks at that time urged "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 included J.P. Morgan Chase & Co., Citigroup Inc., HSBC Holdings PLC, Deutsche Bank AG and Bank of America. However, at the time, the NIRP threat was rather nebulous, with the banks telling 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 at some point eventually. Nothing was imminent.

That changed overnight, when as the WSJ once again reported, the nebulous became tangible after J.P. Morgan Chase, the largest US bank by assets (and second largest in the US by total derivative notional) is preparing to charge large institutional customers for some deposits. WSJ adds that JPM "is aiming to reduce the affected deposits by billions of dollars, with a focus on bringing the number down this year.

The details on this latest dramatic, and until central-planning arrived, unthinkable, monetary experiment:

The move is the latest in a series of steps large global banks have been discussing in recent months to discourage certain deposits due to new regulations and low interest rates.


J.P. Morgan’s steps are among the most detailed and widespread. Specifics are likely to be unveiled Tuesday by J.P. Morgan executives at the bank’s annual strategy outlook with investors, these people said. Among other points, the bank is expected to stress alternatives customers affected by the deposit moves can use for their excess cash.


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 the memo. 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.


“We are adapting to a changing regulatory environment across our company,” according to the J.P. Morgan memo sent Monday and signed by the bank’s asset-management, commercial-bank and corporate and investment-bank heads.




J.P. Morgan is one of the most affected by new capital and liquidity rules, in part because it is one of the largest banks and has a variety of complex businesses, including trading and serving hedge funds. The memo notes that the changes are necessary to deal with clients deemed more interconnected and risky by regulators. In addition to J.P. Morgan’s relationships with hedge funds, foreign banks and private-equity firms, its dealings with central-bank clients could be also affected.


Under the bank’s new push, those clients will be asked to adjust certain deposits viewed as more temporary by either paying a new fee or moving the proceeds to a similar J.P. Morgan product such as a money-fund sweep account. In some cases, the bank will likely ask clients to hold these so-called nonoperational deposits at a different firm.

The WSJ punchline: "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."

And therein lies the rub, because as the Fed is preparing to raise short-term rates, which most directly affect the cost of deposits to banks (we hardly need to remind readers that the "interest rate" on the general unsecured claim that is a deposit has been ~0.00% for the past 6 years), banks are telegraphing that they have more than enough funding on the liability side of the balance sheet, and that they are comfortable enough with procuring other sources of funding that are not deposits - whose cost of capital may rise if indeed Yellen hikes rates in June - that the entire Fed rate hike process will be moot.

Of course, none of this is new to readers. Recall from April of 2013 our "One-Chart Summary Of All That Is Wrong With The US Financial System: JPM Deposits Over Loans" in which we showed that JPM, together with the other Big 4 deposit-taking TBTF megabanks have about $3 trillion in deposits over loans: the same amount as the liquidity injected by the Fed over the same time period.


Last November, the WSJ observed as much when it noticed the relentless increase in bank deposits unaccompanied by a matched increase in loans:


So now that the Fed may be finally pushing back on the commercial banks, and telling them that the cost of deposit funding is about to go up, banks themselves are pushing back on the Fed, and signalling that thanks to the trillions in fungible QE liquidity, they don't care if the Fed hikes rates, as they are now proactively seeking to purge deposits from their balance sheets.

Paradoxically, in the New Normal, even the veiled threat that one item of a bank's capitalization may have a non-zero cost of capital, is enough for the bank to do everything in its power to eliminate said cost of funding - i.e., deposits - and replace it with other sources of cheaper funds, mostly emerging from the vastly unregulated shadow banking system.

In any event, NIRP is now officially in the US, which means that one after another US commercial banks will join what has already become a NIRP free-for-all across most of continental Europe where NIRP now reigns supreme, and where trillions in government bonds yield negative rates.

Why all of the above is most amusing is that it was in August of 2012 when none other than staffer of the New York Federal Reserve warned that "If Interest Rates Go Negative . . . Be Careful What You Wish For."

These were some of the highlights of the perverted, broken monetary system that NIRP would unleash in the US as per the Fed's warning from less than 3 years ago:

  • if rates go negative, the U.S. Treasury Department’s Bureau of Engraving and Printing will likely be called upon to print a lot more currency as individuals and small businesses substitute cash for at least some of their bank balances.
  • I might even go to my bank and withdraw funds in the form of a certified check made payable to myself, and then put that check in a drawer.
  • If bank liabilities shifted from deposits to certified checks to a significant degree, banks might be less willing to extend loans, because certified checks are likely to be less stable than deposits as a source of funding.
  • As interest rates go more negative, market participants will have increasing incentives to make payments quickly and to receive payments in forms that can be collected slowly
  • if interest rates go negative, the incentives reverse: people receiving payments will prefer checks (which can be held back from collection) to electronic transfers

And the punchline:

  • we may see an epochal outburst of socially unproductive—even if individually beneficial—financial innovation

In short, things in the already insane monetary realm are about to get a whole lot insane-er. But don't worry, the central banks are in full control.

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Tue, 02/24/2015 - 09:30 | 5821958 Ivanovich
Ivanovich's picture

Maybe goldman will be next....wait, where are the Goldman banks again?

Tue, 02/24/2015 - 09:33 | 5821965 Haus-Targaryen
Haus-Targaryen's picture

Aren't these the same guys who won't let you wire transfer more than $50k outside the country per month? 

Tue, 02/24/2015 - 09:34 | 5821973 SickDollar
SickDollar's picture

you did not get the memo

 there are two categories in the financial system:

The sheeple treatment and the rich treatment


Tue, 02/24/2015 - 09:41 | 5822015 Took Red Pill
Took Red Pill's picture

I will happily move my money out of the banks. Already have pulled most of it!

Tue, 02/24/2015 - 09:50 | 5822047 TruthInSunshine
TruthInSunshine's picture

We're just about done here.

This is a concrete, clear & unambiguous sign that the next crisis really is close at hand, given how much central bank policy has distorted not just price discovery, normative historical economic metrics, but underlying functions/mechanism of the implicit agreements that form the cornerstone of society.

We will have a repeat of the sector bust (with profit-less -and often revenue-less "startups" - now being valued in the billions) tied together with another RE bust (not as broad as 2008, and focused more on dispossession versus loss in value) tied together with busts in commodities, and, the big Mac Daddy, the corporate bond bust (which will have massive follow-on ramifications for both equities and the general financial sector).

Central bank policies across the developed AND emerging market world have now set the table for the next chain of dominoes to fall.

Tue, 02/24/2015 - 09:53 | 5822060 LawsofPhysics
LawsofPhysics's picture

Yes, resulting in even more government intervention(fascism/cronyism) and war.

Interesting times indeed.

Tue, 02/24/2015 - 10:09 | 5822121 y3maxx
y3maxx's picture

It will be unsurprising now to see an Archduke Ferdinand moment very soon...

Tue, 02/24/2015 - 10:13 | 5822142 BigJim
BigJim's picture

I think this sends a VERY clear message to get out of PMs (especially physical held outside the banking system) and buy dollars.

Sell, sell, sell, sheepie-weepie!


Tue, 02/24/2015 - 10:23 | 5822181 Soul Glow
Soul Glow's picture

Yeah, sell the gold your grandpa gave your for cash and put it in unallocated accounts at JPM.  Fuckin' genius sheeple!  Genius!

Tue, 02/24/2015 - 10:34 | 5822229 pods
pods's picture

So banks lend against deposits.  Deposits leave banks. Banks lend _____?
This is going to end well.

Again the muppets will take it right in the poopchute.  Being charged to lend the banks money, who then charge the muppets again when they (create and) lend agianst those deposits.

Good to be a bank.


Tue, 02/24/2015 - 10:55 | 5822315 chubbar
chubbar's picture

I'm pretty sure (don't have a link) that Greenspan cut the tie between deposits and lending several years back so that the 10 to 1 fractional reserve requirementt we all learned about in school is no longer in force. I "think" that banks can lend without a tie to reserves. Hell, they just do a bookkeeping entry, securitize it, hypothecate it and make sure the gov't picks up the risk at this point in the ball game. The whole system is a house of cards.

Tue, 02/24/2015 - 12:54 | 5822730 pods
pods's picture

I think it was Bernankestan that lowered the reserve requirement but idk.

Who really knows anymore. I am seriously waiting for Morpheus to give me a quick note on the computer to get the hell out of this powerplant.


Tue, 02/24/2015 - 10:21 | 5822173 holdbuysell
holdbuysell's picture

With nothing more than history as a guide, I'm going with the seven year cycle of the Shemitah year which has gone bang every time over several generations.

Circa September 13, 2015.

Let's see.

Tue, 02/24/2015 - 10:26 | 5822196 new game
new game's picture

buysellhold; agreed, year of blood in the streets.

Tue, 02/24/2015 - 13:14 | 5822785 JRobby
JRobby's picture

A person I know who runs a pretty successful cafe told me Wells charges a service charge to take larger cash deposits. He did not say how large. Assume $5000+. He did not seem to understand or be bothered by the ramifications of it.


Tue, 02/24/2015 - 16:26 | 5823682 nailgunnin4you
nailgunnin4you's picture

This is a concrete, clear & unambiguous sign that the next crisis really is close at hand


Yep, global markets implode tomorrow zerohedgers called it! aaaaaaarrrrrggghhhhh

Tue, 02/24/2015 - 09:51 | 5822050 SoilMyselfRotten
SoilMyselfRotten's picture

NIRP Translated: we are making so much money leveraging the govt free money we don't need it from you schmucks

Tue, 02/24/2015 - 09:54 | 5822062 TruthInSunshine
TruthInSunshine's picture


Why would any institution want "deposits" when they can raise as much fiat money as they wish by selling bonds/debt at whatever Treasuries are paying + a few measly basis points, especially when they're too big to fail?

Tue, 02/24/2015 - 10:17 | 5822159 SofaPapa
SofaPapa's picture

And yep, the process of divorcing "money" from any concept of collateral or productive capacity takes another step forward.  As soon as J6P catches on to the fact that money is no longer related to anything of tangible value, look out...

Tue, 02/24/2015 - 10:25 | 5822189 GMadScientist
GMadScientist's picture

Me: still breathing in the meantime.

Tue, 02/24/2015 - 11:46 | 5822552 A Nanny Moose
A Nanny Moose's picture

You presume that J6P understands the concept of money. They do not. after all, gummint educated them. Gummint will fuck it up again, and J6P will simply accept the offered strawman, and call for more gummint action.

Tue, 02/24/2015 - 14:02 | 5822982 SofaPapa
SofaPapa's picture

Actually, I was moving ahead of myself further than that.  My point is more that at some point, this monetary experiment gets out of control, and the real economy gets involved.  When prices go out of control on the street level, escaping the "financial" black hole where they have currently been contained, then the game changes.  You are absolutely right that J6P is even then not going to understand what the hell is going on, but when they cease to be able to get the necessities in a predictable manner, they will react, and that reaction will not be pretty.  

As to what GMadScientist said above, I do agree that I am getting ahead of things here.  I also will not hold my breath for this to happen.  It's going to take a while more.  But when it does happen, history suggests it's going to happen fast.  And for those who didn't see it coming at all, it will seem instantaneous.  People on here have been watching "it" happen for years, so it won't seem that strange, but most don't have the inclination to watch this shitshow unfurling.

Tue, 02/24/2015 - 10:16 | 5822152 shouldvekilledthem
shouldvekilledthem's picture

If you use fiat then you are still a slave.

Tue, 02/24/2015 - 10:26 | 5822188 TruthInSunshine
TruthInSunshine's picture

Any too-big-to-fail/too-big-to-prosecute institution, such as JPM, uses fiat money to enslave others, just as all the other Fed's handlers do.

Tue, 02/24/2015 - 09:35 | 5821981 dufferin
dufferin's picture

Are Muslims responsible for this as well?

Tue, 02/24/2015 - 09:38 | 5821995 Ivanovich
Ivanovich's picture

No, not this time.  This one is Bush's fault.  

Tue, 02/24/2015 - 09:40 | 5822007 Haus-Targaryen
Haus-Targaryen's picture

I thought it was those Constitutionalists and those terrorists who believe in the Bill of Rights. 

Tue, 02/24/2015 - 09:56 | 5822068 giovanni_f
giovanni_f's picture

Not to forget all those unpatriotic gold hoarders betting on the decline of America.

Tue, 02/24/2015 - 10:05 | 5822111 Clarabell
Clarabell's picture

Are you kidding me? Everyone knows this is Putin's fault!

Tue, 02/24/2015 - 10:14 | 5822134 giovanni_f
giovanni_f's picture

Using the insider information the traitor Eward Snowden handet out to Russia.

Tue, 02/24/2015 - 10:18 | 5822162 Gaius Frakkin' ...
Gaius Frakkin' Baltar's picture

No... something this devious is the fault of a lone-wolf, right-wing extremist.

Tue, 02/24/2015 - 10:58 | 5822326 Panafrican Funk...
Panafrican Funktron Robot's picture

Guys, this is obviously the work of Waddell and Reed.

They sold 75,000 emini contracts in a single day.  That's, like, almost 4% of an average trading day volume.  Terrorists.

Tue, 02/24/2015 - 09:43 | 5822011 GetZeeGold
GetZeeGold's picture



Are Muslims responsible for this as well?


Haven't you heard.....they aren't responsible for anything.


How to shutdown a "peaceful" Muslim...don't behead the messinger.

Tue, 02/24/2015 - 10:03 | 5822101 new game
new game's picture

usery is against da ritual. negative oil rates though...

Tue, 02/24/2015 - 10:21 | 5822167 Ghordius
Ghordius's picture

you are OT, with your Muslim idiocies

if you want to find only one culprit, then you don't need to go further then the abolishment of the Glass-Steagall Act, in 1999


I am a Christian, specifically a Catholic. there is something like one billion of us. am I responsible for every idiocy that is done by some Christians, or in the name of Christ?

in the same way, why are you trying to say that one billion Muslims is responsible for every idiocy that is done by some Muslims, or in the name of Islam?

only because that idiot in the White House has said something about it? my goodness, some of you Americans take partisanship really seriously, don't you?

your George W. Bush should be waterborded, in my opinion. nevertheless, I would never go as far as saying that he did not say something right, in between of his idiocies


Tue, 02/24/2015 - 10:28 | 5822201 GMadScientist
GMadScientist's picture

Did you give them money? Then yes, you are somewhat culpable.

Fuck waterboarding...drop Cheney, Rummy and the rest somewhere West, South, East, or North of Tikrit.

Tue, 02/24/2015 - 10:28 | 5822205 knukles
knukles's picture

See, if you guys hadn't started the Crusades than Luther wouldn't have put the dress code on the cathedral door telling the Muzzies to uncover their faces to make deposits and withdraws and none of this would have happened.

(Methinks most of us Yankee Dogs are tremendously weary of the war on Christians and praise constantly heaped upon the Religion of peace by official (offal) sources.... might be a cause for such comments so take it accordingly.  Likewise, approximately 50% of folks don't have a clue as to Ynohos religion no give a rat's ass, another 20% figure he's a Christian 30% think he's a muzzie and another 7% think he's a commie.  And besieged daily by the MSM about this shit within the Hegelian Dialectic)

Tue, 02/24/2015 - 13:20 | 5822806 Icelandicsaga.....
Icelandicsaga...............................................'s picture

Knuckles.. you dah man.

Tue, 02/24/2015 - 10:57 | 5822323 Real Estate Geek
Real Estate Geek's picture

+1 just for the GWB waterboarding proposal.  (And since it's two-fer-Tuesday, let's not forget Chalkie.)

Tue, 02/24/2015 - 09:46 | 5822025 Pure Evil
Pure Evil's picture

Yes, its the muzzies fault.

Time to bomb, bomb, bomb, .......bomb, bomb, bomb Iran.

Tue, 02/24/2015 - 10:23 | 5822183 Ghordius
Ghordius's picture

Pure Evil, something you might like that I heard yesterday: "it's difficult to bomb Iran... without hitting Iranian Jews". Enjoy

Tue, 02/24/2015 - 09:59 | 5822082 Grinder74
Grinder74's picture

Yes, because paying/earning interest is forbidden by the Pedophile Prophet(TM).

Tue, 02/24/2015 - 10:15 | 5822147 BigJim
BigJim's picture

Let's not forget what the Talmud says about pedophilia, shall we?

Tue, 02/24/2015 - 09:36 | 5821985 GMadScientist
GMadScientist's picture

Bank Holding Company...

Tue, 02/24/2015 - 09:52 | 5822056 Sir SpeaksALot
Sir SpeaksALot's picture

this is all very simple just buy physical gold or silver. why the hell keep deposit in a bank anyway?


Tue, 02/24/2015 - 10:02 | 5822093 new game
new game's picture

not seeing fees at my credit union, actually paying 2 percent on first 10k, about 17/month. combine that with 50/month saving on gas and there is goes to, guess, ???


Tue, 02/24/2015 - 09:32 | 5821966 LawsofPhysics
LawsofPhysics's picture

Good, i was waiting for the opportunity to take out a billion dollar loan and have JPM pay me to do it.


Tue, 02/24/2015 - 09:32 | 5821967 Thirst Mutilator
Thirst Mutilator's picture

BTFATH muppets

Tue, 02/24/2015 - 09:39 | 5822002 Luckhasit
Luckhasit's picture

Damn, you beat me to it! Oh well, STFS!

Tue, 02/24/2015 - 09:34 | 5821972 EscapeKey
EscapeKey's picture

Perpare for the senior tranched collateralized re-hypothecated credit default swap.

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