Wall Street banks want to avoid passing negative interest rates along to U.S. consumers, even in a test-case scenario in this year's regulatory exams.
But options are limited and shrinking. First-quarter earnings reflected consumer deposit growth far outpacing that of corporate and commercial clients, which, in some instances, declined.
It has the potential to throw a wrench into this year's regulatory exams, or stress tests, and future ones as well. This is the first year the Federal Reserve is requiring banks to plan for negative interest rate policy in their stress tests.
Wall Street was expected to pass negative interest rates on to their corporate and commercial clients, effectively charging them for maintaining accounts. They were likely to avoid passing costs on to U.S. consumers, their advisors said heading into stress tests. But it isn't clear how they would carry out these intentions if corporate and commercial client accounts shrink.