Earnings credit rate (ECR) programs, a long-time featureof U.S. business banking, are heading overseas. Banks are preparingto offer the products outside the United States in response tocustomer demand and because they think it will help them to complywith new measures of deposit stability to be imposed by BaselIII.
ECR arrangements provide companies with implied interest ontheir balances that they can then use to offset their bank fees.Banks that are expanding ECR outside of North America include Bankof America Merrill Lynch, Citibank and J.P. Morgan TreasuryServices.
While compensating balance arrangements have occurred informallyoutside the United States before now, “a more formal mechanicalprocess is what some banks are beginning to roll out in response toBasel III,” according to Greg Kavanaugh, head of the globalliquidity product team at Bank of America Merrill Lynch.
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Susan Kelly
Susan Kelly is a business journalist who has written for Treasury & Risk, FierceCFO, Global Finance, Financial Week, Bridge News and The Bond Buyer.
