National Rates And Rate Caps

IGR | Nov 20, 2022 | 580 posts since 2020

What do we know about that?

Except that FDIC publishes the updates third Monday of every month.

November is due Monday 21st.

What is the impact on the deposit rates if any, direct or otherwise?

https://www.fdic.gov/resources/bankers/national-rates/

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Answers

MAKNYC | Nov 20, 2022 | 323 posts since 2015

Perhaps I am not understanding your question, but if you are asking whether this rule has any meaningful impact on overall rates I would suggest no. In general banks are awash in deposits relative to need. And this rule only applies to undercapitalized entities, which is a very small subset of financial institutions. If any of most banks wanted to offer 6% on Monday they would be allowed to.

I remember the final days of Washington Mutual in 2008. They got caught up in the subprime crisis and were heading to imminent failure. In NYC they were offering 5% 1 year CD’s which was WAY in excess of normal rates at the time. And back then FDIC insurance still covered only $100k as opposed to $250k today. I ran over to a branch to open multiple titled accounts as quickly as I could to grab that gift. I don’t even think they made it a week before JP Morgan had buy them, and Chase honored the CD terms thru maturity, which they would not be required to do. This rule is in place for situations like that.

IGR | Nov 20, 2022 | 580 posts since 2020

the practical aspect of my question is pretty basic...
how to better time entry point of long term deposit contract...
wait for Policy maker Fed to provide more long term visibility or Regulator FDIC to loosen short term restrictions or both.
I am not entirely sure that FDIC regulations have limited application as you said, I doubt FDIC is willing and prepared to insure Deposits every institution attracts on its unrestricted term...
"Regulators are reportedly still referencing the national rate caps during exams of well-capitalized banks and insisting that bank managers speculate as to what would happen to their deposits if their deposit rates were suddenly lowered."
In general, it is not the liquidity, it is a spread that runs Banking business and drives its profitability.
Even well-capitalized institution are currently sitting on significant amount of the long term Loans that were issued at low rate and now that Liability must be covered by Deposit at twice the rate to the expense of the Lender.
WaMu transfer to Chase, CountryW to BofA or IndyM straight dissolution of 2008-9 are unrelated examples of the excesses as of then, when I had to wait for more than a year for Barney to send me a check.
the historic references doesn't help me to decide now when to switch from short to long term actions

Choice | Nov 20, 2022 | 937 posts since 2020

It could be a multiple step function...filling a slot with a CD of.... and ewp of.... Then looking at the delta in rates...after all that is the net effect (plus net of ewp) for considering a further wait/move? Or continue to look for a finite condition/calculus to get to the apex (before everyone else)?

IGR | Nov 20, 2022 | 580 posts since 2020

I am not competing, Evolutionary path is cooperation.
I simply try to improve my efficiency.
The choices there are to monitor the rates daily and analyze every special or to set the schedule around key dates.Continuedly recalculating Deposit contracts based on rate changes would set me into perpetual motion where i would have to count in the cost of my effort.

Rickny | Nov 20, 2022 | 1,296 posts since 2017

I had 5% CDs with WaMu when they failed. I was surprised Chase honored the rate. My experience is the bank taking over a failed institution did not honor the failed banks rate.

IGR | Nov 21, 2022 | 580 posts since 2020

And I had over-the-limit CD at Indy. So, almost everyone who had savings was affected and thus crisis.
How to apply past experience moving forward?

IGR | Nov 21, 2022 | 580 posts since 2020

National Rate Caps were increased to 6.34% for term deposits. No increase for liquid deposits.
I still have no idea how this is going to be propagated onto accounts interest rates.

GH1 | Nov 21, 2022 | 1,054 posts since 2017

Chase did not like it when they had to honor the old accounts by me At that time i was given free wire transfers they got upset that they could not charge me. I kept the Washington Mutual checks. i went to cash one at chase last year They said who is washington mutual i said it you. They looked dumbfounded. I said look up the account. Then a manager approved it. I still laugh these banks do not inform employees how to handle these issues, No reason for new checks as chase wanted to charge for those. Account numbers are the same

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