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Foreign Banks Pay Up for U.S. Deposits

Foreign banks are paying up for U.S. deposits that many domestic lenders are taking pains to avoid.

Mizuho Bank Ltd., Mitsubishi UFJ Financial Group, BNP Paribas SA and Banco Bilbao Vizcaya Argentaria SA are among European and Japanese banks outbidding their U.S. peers for large corporate deposits across the country, said treasurers and chief financial officers. In some cases the foreign banks are paying twice or three times as much, they said.

The gap reflects a scramble by some overseas lenders to find new sources of U.S. funding. A change in Securities and Exchange Commission rules governing money-market funds has rolled back the market for short-term debt, known as commercial paper, that the banks have long sold to raise funds.

Regulators have been pushing banks to find more-permanent sources of funding in the years since the financial crisis, in a bid to reduce the odds that the banking system will suffer a so called run, in which the banks’ lenders decline to roll over their loans, creating a funding crisis.

“There’s a lot of incentive for foreign banks to raise funding in the U.S.,” said Anthony Carfang, partner at Treasury Strategies Inc., a consulting firm. “The underlying theme is that every bank has to fund its loans with local deposits.”

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