Earnings credit rate (ECR) programs, a long-time feature of U.S. business banking, are heading overseas. Banks are preparing to offer the products outside the United States in response to customer demand and because they think it will help them to comply with new measures of deposit stability to be imposed by Basel III.
ECR arrangements provide companies with implied interest on their balances that they can then use to offset their bank fees. Banks that are expanding ECR outside of North America include Bank of America Merrill Lynch, Citibank and J.P. Morgan Treasury Services.
At the same time banks are considering offering ECR overseas, the 2011 repeal of Reg Q raises the prospect that its use may decline in the United States. But even though banks introduced interest-bearing checking in the wake of the repeal, companies have been sticking with ECR.
“The corporate client base hasn’t really changed their behavior,” Oswalt said. “They haven’t wanted to move away from ECR.”