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Banks Tweak Products with Basel III in Mind

Earnings credit rate products broaden out; callable CDs are coming.

By Susan Kelly | Updated on September 17, 2014
Banks are preparing for the new capital requirements that will start to take effect in the United States at the start of next year by making improvements in their earnings credit rate products, and additional changes in banks’ cash management products are expected down the road.

Basel III’s liquidity coverage ratio considers banks’ ability to hold onto deposits for a period of 30 days in times of stress and requires banks to hold more capital against deposits deemed likely to be withdrawn. One way to qualify deposits for lighter reserve requirements is to show that the deposits are linked to the corporate customers’ operations, such as accounts used to make payroll or handle accounts payable.

“Those deposits that don’t qualify as operating deposits will have very low value,” said Dave Robertson, a partner at consultancy Treasury Strategies. “The nice thing about earnings credit is it clearly ties the balance to the services.”

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