Big Winners as Fed Raises Rates: Foreign Banks
By Katy Burne
Some of the biggest beneficiaries of the Federal Reserve’s recent interest-rate increase will be foreign banks. Units of foreign banks this year received nearly half the roughly $6.25 billion in interest the Fed paid banks on the money, called reserves, they park with the Fed, the central bank’s data show. Those institutions control just about 15% of all bank assets in the U.S. The Fed’s interest payments to banks are likely to roughly double next year because in mid-December it raised the rate it pays on reserves to 0.50% from 0.25%. Raising the IOER rate to 0.50% from 0.25% will increase the Fed’s interest payments to banks to about $13 billion annually, assuming reserves stay at the same level, said Karen Petrou of Federal Financial Analytics Inc.