According to available data, US banks have earned more than $1 trillion during the two and a half years of the Fed's "higher and longer" interest rate policy.
The high interest rate regime has allowed thousands of American banks to earn higher returns on their deposits with the Fed, according to the Federal Deposit Insurance Corporation (FDIC), the Financial Times reports.
And while some analysts and market observers believed that banks would pass on a significant portion of the higher interest rates to their customers, this did not happen.
In the second quarter of 2024, when the Fed paid banks 5.5% a year on deposits, depositors received an average annual rate of 2.2%, according to regulatory data that includes accounts that do not pay interest.
At JPMorgan Chase, depositors received an annual interest rate of just 1.5%, while Bank of America depositors received 1.7% per annum.
With low interest rates for depositors, banks received $1.1 trillion in additional income, about 66.67% of what the Fed paid in interest over the past two and a half years. Meanwhile, depositors received only $600 billion.
When the Fed cut interest rates this month, some banking giants rushed to further slash the interest they pay wealthy savers: JPMorgan and Citi announced rate cuts of 50 basis points in line with the Fed's own moves.
More interesting news - subscribe
