From Tyler Durden at zerohedge.com:
As a result of the Fed’s balance sheet expanding to $4.5 trillion over the past 7 years, the most direct consequence has been the increase in excess reserves held at various banks to just over $2.5 trillion. This, as we have shown before using the Fed’s H.8 data, means that cash held by various commercial banks has risen proportionately, and as shown in the chart below, there has been a direct correlation between the amount of excess reserves in the system (shown by the black line) and bank cash holdings.
One thing that stands out in the chart above is that while $1.4 trillion of this cash can be found at domestic US banks, both large ($1.06 trillion) and small ($370 billion), a whopping $1.15 trillion remains parked at foreign banks operating in the US. This differential can be seen in the chart below.
While the reasons for disproportional allocation of cash within foreign banks has been discussed over the years (“Where The Fed’s Excess Reserves Are Going: 51% Foreign Banks; 49% Domestic”), and is largely driven by the FDIC’s decision several years ago to levy a 15bps deposit insurance assessment from large US bank holding companies, the outcome is clear: nearly half of all Fed excess reserves are parked with foreign banks.
Why is this an issue?
To continue reading: The Fed Will Hand Out $11 Billion In Riskless “Profits” To Foreign Banks In 2016
