During the financial crisis, banks that had “liquidity or solvency problems priced [certificates of deposits] a lot more aggressively just to maintain liquidity,” said Andrew Frisbie, an executive vice president at the advisory firm Novantas. “That forced some other banks — even those that were healthy themselves — to take some amount of repricing in response.”
Some banks have already made a big splash with cuts in deposit rates. One of them, the online bank Ally Financial Inc., said deposit inflows did not slow down afterward and that it is well positioned to “continue to optimize” prices as it nears its target of increasing deposits to about 75% to 80% of funding.
Regions Financial Corp. said that its deposit costs already peaked in May and that it is set to make further reductions quickly if the Fed cuts, in part because a significant portion of its deposits are indexed to market rates.
Several banks — including Wells Fargo and Regions — have also highlighted accounts that pay close to market rates because of exception pricing or promotions as ripe for reductions.
Most commercial accounts “are priced with some level of negotiation with the relationship banker,” Frisbie said. That results in variable pricing and an analytic challenge when responding to changes in interest rates. But for commercial or institutional customers given “the very best rate that the bank can, most banks have plans in place to bring that money down as soon as the rate cut is announced at a 100% beta,” Frisbie added.