Passers-by in front of a Wells Fargo branch in New York (Getty)
The Wall Street Journal revealed today, Tuesday, that the rich people of America are increasingly withdrawing their money from… Bank accounts In search of higher profits.
Major banks are still paying low interest rates on their checking and savings accounts despite sharp interest rate increases implemented by the Federal Reserve.
And the newspaper added, in a report, that some wealthy people transfer the additional savings they collected during the epidemic period to investment tools Others, whose rates follow the interest paths approved by the Federal Reserve, up and down.
Major banks still pay low interest on checking and savings accounts despite sharp increases in the Fed’s increases.
A typical savings account in US banks pays an average interest rate of 0.33%, according to the US Federal Deposit Insurance Corporation, while all Treasury securities, money market funds and certificates of deposit pay an interest rate of between 4% and 5%.
“Every time the Federal Reserve raises interest on the dollar, the escape from banks and the withdrawal of idle cash in low-yield accounts on other financial instruments increases,” said Jason Goldberg, a financial analyst at the British “Barclays PLC” bank.
He added that “those with surplus funds are looking for other sources of investment other than bank accounts.”
The largest wealth management companies in commercial banks own deposits worth billions of dollars for clients, and they benefit from these deposits to obtain high profitability by investing them in various fields.
Despite the higher returns available elsewhere, many owners of money chose to keep it in bank accounts over the past year due to uncertainty regarding the path of the US economy.
However, with the signs of an improvement in the investment climate in the “Wall Street” market, the pace of withdrawing money from bank accounts to funds and investment companies is increasing.
According to the “Wall Street Journal”, deposits in the wealth unit of “Bank of America”, which includes the “Merrill Lynch” wealth management bank, decreased by 17% in the past year 2022 to $ 324 billion. Deposits in the bank’s consumer unit fell by 0.6% to a trillion. dollar.
The bank’s chief executive, Brian Moynihan, said on a call with analysts that wealthy clients are moving their money into money market funds.
Bank of America paid only 0.06% interest on consumer deposits in the fourth quarter of last year and 0.88% on deposits with interest in all US branches.
While Merrill Lynch, the investment branch of Bank of America, pays an interest rate of 3.98% on a bank account whose deposits amount to at least $100,000.
Wealth management deposits at Wells Fargo declined by 28% to reach $139 billion in 2022 compared to the previous year, and consumer deposits at the bank decreased by 3%.
In the same regard, deposits at JPMorgan Bank decreased by 17% in the asset and wealth management unit and by 3% in retail banking services.
The bank pays 3% interest to a customer who deposits $10,000 for a full year, and this interest rises to 3.75% for a customer who deposits $100,000 or more in the account.