Today - Apple launched its Goldman Sachs FDIC-insured savings account. You can see the announcement at Apple Card's new high-yield Savings account is now available, offering a 4.15 percent APY - Apple
What should be our response in this 5% Fed Fund environment?
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Neil Stanley
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Original Message:
Sent: 04-17-2023 17:30
From: Rob Blackwell
Subject: Tuesday Topic: It's All Hot Money Now
In the past, the term "hot money" was commonly used to describe brokered deposits. But with rates higher than they've been in decades and technology enabling seamless flows of cash, uninsured core deposits, particularly transactional and operational accounts, are proving much hotter than previously thought. This was evident when SVB (where more than 90% of deposits were uninsured) and Signature Bank (where 90% of deposits were uninsured) collapsed in a matter of days.
Some customers are moving their deposits from banks to money market funds, which received inflows for a fifth straight week. Given these pressures, bank boards and management teams should take a harder look at the assumptions and models underpinning their deposits, Bank Director says. In particular, they should reevaluate static decay analyses, which are likely overestimating deposit value.
As CorePoint CEO Neil Stanley explains, historical data used in these assessments is unreliable because rates were super-low for the past 15 years. "Decay studies will say that a checking account has a life of eight to 10 years," Stanley told Bank Director. "On what basis? If you pay nothing on a checking account for the next two years, [do you really think] that none of those deposits will leave?"
Given ongoing funding pressures, some experts are advising banks to develop strategies to prevent large-deposit outflows, explore options for additional insurance coverage, and focus on creating value for depositors in other ways.
How are your institutions managing the funding environment? Anything working in particular that you can share with the group?
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Rob Blackwell
Chief Content Officer and Head of External Affairs
IntraFi
Arlington, VA
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