As the likelihood of the Fed raising interest rates looms ever larger, it’s time for banks to consider the strategic implications of their time deposit funding portfolios, commonly referred to as certificates of deposit (CDs).
What to do about overdraft (OD) fees, or the loss thereof? For banks with assets over $10 billion, service charge income on deposit accounts, with OD income being the largest component, fell by almost half between 2010 and 2013 and at a rate twice as fast as for smaller competitors.
It’s not a stretch to say the typical experience for a customer getting a consumer loan through their trusted community bank is only slightly more appealing than working with the sleazy finance desk at the local car dealership.
In a recent article for BAI Banking Strategies, I broached a theory that deposit rates start rising prior to an anticipated increase in the Fed funds rate because of our tendency to try to outdo the competition.
“Overdraft fees should not be ‘gotchas’ when people use their debit cards,” said Richard Cordray, director of the Consumer Financial Protection Bureau (CFPB), after the regulatory agency published its most recent report, “Data Point: Checking Account Overdraft.
The banking industry has anxiously awaited a rising rate environment, anticipating that interest income from loans and investments will rise more quickly than interest expense on deposits and other funding.