Banks Fear Coming Fight Over Fed’s Excess Reserves
By John Heltman
December 21, 2016
Banks are moving to defend the Federal Reserve’s practice of paying interest to member institutions for their excess reserves held in central bank accounts in the face of mounting speculation that the practice will be a target of the next Congress. A report released late Monday by Federal Financial Analytics and sponsored by the American Bankers Association lays out the purpose and advantages of paying interest on excess reserves – a practice known as IOER – as one of the Fed’s primary means of affecting monetary policy. Wayne Abernathy, executive vice president of Regulation at the American Bankers Association, said the group is concerned that Congress might take aim at IOER when it convenes in January and committees start crafting legislation to revise Dodd-Frank.