Deposits have continued to pile up on balance sheets, prompting banks to adopt pricing strategies and even to set balance limits for individual commercial clients in an effort to steer away funding they do not need amid soft loan demand.
The growth has been concentrated among commercial depositors, where balances are up 40% since the beginning of the pandemic, according to Peter Gilchrist, executive vice president at the bank analytics and advisory company Novantas. “In terms of the excess or non-operating funds, [banks] are absolutely looking for ways to limit that accumulation,” Gilchrist said.
A Novantas survey of 40 large commercial banks found that 72% had taken steps to actively discourage commercial deposit growth, with many using “reverse tiering,” or lower interest rates or rebates against treasury management fees as balances grow. About 26% said they had imposed strict balance limits on clients, and 16% said they had suggested that clients place deposits at other banks. Those sorts of steps are “generally reserved for higher-end commercial” clients with sophisticated treasury operations, Gilchrist said.