Another gamble is Indonesian short-term deposits, yielding about 33% even after a 76% devaluation.
Other options being considered are limiting check cashing and converting checking accounts into term deposits.
Bank funds held in term deposits at the Fed would not be available for the federal funds market.
Traditionally, commercial banks used short-term deposits to finance relatively short-term working capital.
As a result, one source of profit, taking short-term deposits and lending the money for longer at higher rates, has dried up.
With interest rates so low, bonds and term deposits offer negligible returns.
The bank relies on the idea that there will be a continual stream of those short term deposits with which it can finance those much longer loans.
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In addition to limits on ATM withdrawals, the measures allow authorities to restrict noncash transactions, freeze check cashing, limit withdrawals from bank accounts and even convert checking accounts into fixed-term deposits.
At a minimum, it encourages the unsound structuring of their borrowing activity -- for example, through the USSR's tapping of Western interbank short-term deposits to fund medium-term purposes at home and abroad.
Uruguayan officials hurriedly devised a more flexible alternative, which distinguishes between sound banks (which will operate normally) and unsound ones (some of whose fixed-term deposits are frozen until rescue measures are taken).
Term deposits are be one of several tools that the Federal Reserve employs to drain reserves when policymakers judge that it is appropriate to begin moving to a less accommodative stance of monetary policy.
Banks, as Mr Smithers points out, essentially take two risks: credit risk the risk that a borrower won't pay the money back and what is succinctly dubbed maturity-transformation risk taking in short-term deposits and lending the money out for a longer term at a higher rate of interest to companies or the government (by buying government bonds).
As we discussed in last month Monetary Watch , the recent acceleration in uncovered money substitutes is no longer just about depositors liquidating time and other term deposits in favor of instantly redeemable demand and savings deposits (in Austrian speak, bank depositors liquidating credit claims, raising cash, then depositing and holding that cash in money substitute form with those same banks).
Local institutions offered rates of over 50% a year for short-term time deposits.
Central banks currently hold 70% of their foreign-exchange reserves in longer-term securities and 30% in deposits.
Under this rule, if short-term market rates went up, deposits would be withdrawn from banks and thrifts and put in the money market.
At stake are trades in eurodollar futures--bets on short-term interest rates affecting American dollar deposits outside the U.S.--accounting for 53% of the Merc's overall volume.
American Express earns a net interest income on the spread between the rate it earns from un-loaned amounts sitting in bank deposits and short-term investments in financial securities and the rates at which it extends credit to card members.
Wells Fargo has to pay lower interest rates on its core deposits as compared to long term debt and short term borrowings.
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Banks' operating profits have risen sharply in recent years as they have invested in long-term government securities and funded these with deposits for which they have had to pay almost nothing.
As a practical matter, Moscow's ability to attract interbank deposits, renew short-term credit lines and secure Western loans has been sharply curtailed by the Soviet Union's non-creditworthy status and its massive arrearages to Western firms.
So, its of no surprise, when looking at long term ice core sample and ocean core deposits, they indicate as the Earth warms, so does the carbon footprint from the increase carbon produced high in the atmosphere.
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Plus, they were lending the money short (often only overnight) and the banks taking in those deposits were transforming them into longer term loans to their customers.
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Deposits are still too short-term to allow banks to finance many property loans of 15 years or more, and finance is still too expensive for the mass of poor Brazilians who need it most.
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In addition, regulators have unveiled all sorts of programs to backstop the short-term lending markets, money market funds, bank deposits and bank debt.
"In the medium term the decision taken regarding the loss on bank deposits could have major ramifications for the eurozone if the European debt crisis re-escalates, " said Gary Jenkins, managing director of Swordfish Research.
It will have all the insured deposits and the FDIC-guaranteed short-term debt as liabilities.
For savers, this means regular bank deposits, money-market funds and short-term Treasurys effectively lose them money each year.
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To fill their funding holes from fleeing deposits much of this borrowing has come from the Long Term Refinancing Operation or LTRO.
In the short term, the banks themselves will be very glad of a flood of retail deposits: that will leave them less dependent on jittery wholesale markets.
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