US banks have reportedly raked in more than $1 trillion after two and a half years of Fed interest rate policy.
Data from the Federal Deposit Insurance Corporation (FDIC) shows that the high interest rate regime allowed thousands of US banks to earn higher returns on their deposits with the Fed, the Financial Times reports.
And while some analysts and market observers thought banks would pass on a significant portion of the higher interest rates to their customers, that didn’t happen.
In the second quarter of 2024, when the Fed paid banks 5.5% interest on deposits, savers received an average annual interest rate of 2.2%, according to regulator data that includes accounts that pay no interest.
At JPMorgan Chase, savers received an annual interest rate of just 1.5%, while savers at Bank of America received 1.7% interest per year.
Low interest rates for savers have helped banks generate $1.1 trillion in additional revenue, about 66.67% of what the Fed has paid in interest over the past two and a half years. Meanwhile, depositors received only $600 billion.
When the Fed cut rates this month, some banking giants were quick to further cut the rates paid to wealthy savers, with JPMorgan and Citi announcing a 50 basis point cut, in line with the Fed’s own actions.
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