Recent regulations that are now causing big banks to start charging fees for some business deposits are a really bad idea, and will likely benefit small, regional banks, Chris Whalen, senior managing director at Kroll Bond Rating Agency, told CNBC Monday.
The economists who designed the liquidity rules "don't have a clue of what they're doing," Whalen said in an interview with "Closing Bell."
"I work with banks every day. Trust me; this is a really bad idea. You can't measure liquidity the way that they proposed."
Under the rule, the Federal Reserve is now incentivizing banks to keep less risky assets on their balance sheet. Because the deposits of small banks and hedge funds can be volatile, they require a lot of compliance and are expensive to maintain.
Last month, some hedge funds received a letter from JPMorgan stating that they would likely be charged for these deposits. Bank of America has also been targeting the deposits of hedge funds and smaller financial firms.
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The story was first reported by The Wall Street Journal on Sunday.
To Whalen, it's not only an issue of regulation but one of economics.
"The big banks can't make money on the huge inflows of deposits," he said. "The problem is the big banks can't deploy the funds.… They really don't want the money."
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His advice: Go to a community bank.
"They want to lend the money. These big banks are so overregulated. They have operational issues, as well, that they just can't get out of their own way," Whalen said. "The smaller regionals, the community banks, want these deposits."
—CNBC's Kayla Tausche contributed to this report.