higher Federal Insurance Deposit Corporation (FDIC) assessments will sting, taking a bite out of banks' precious capital cushions. "Last year, we paid $8,000 for FDIC insurance," says Terry Jorde, CEO of CountryBank USA in North Dakota. "This year, we could pay up to $150,000, and that takes away from our ability to lend."
Credit unions are also facing a similar issue.
The other issue is that many banks are being flooded with deposits:
Among smaller banks, jittery customers are flooding those perceived as stable with deposits.
And banks are having difficulty in making new loans:
Already some more-aggressive banks are eager to lend but are finding few qualified and interested borrowers.
So with a flood of deposits combined with few loans, it doesn't look good for deposit rates.
With the potential for more rate cuts, it may seem hopeless to switch banks just for what may be a temporary hike in interest rates. Just remember that this is what banks are hoping people will think. Competition is an important factor that is preventing deposit rates from falling to near zero percent. The more we are willing to move our money, the more competition there will be.