Goldman Sachs Group Inc.’s new online bank, acquired from General Electric Co. last week, caps a decade-long shift by the firm and Morgan Stanley to lean more on deposits for funding — efforts that will help them comply with a U.S. rule unveiled Tuesday.
Goldman Sachs took over $16 billion of deposits from the online business it bought from GE Capital. It merged the platform with its GS Bank USA unit and is offering 1.05% interest on savings accounts opened online. That’s adding to a deposit base that’s already grown almost seven-fold since 2007.
Goldman and smaller rival Morgan Stanley scraped through the 2008 financial crisis, converting into bank holding companies under the oversight of the Federal Reserve, while three of their biggest rivals succumbed or sold themselves to stronger firms. Since then, the pair have been amassing deposits, a form of funding favored by regulators over the short-term financing markets that froze during the crisis. On Tuesday, two U.S. agencies announced their version of a long-term liquidity rule outlined by global regulators in 2014.
The so-called net stable funding ratio requires banks to hold enough easy-to-sell assets to meet any liabilities coming due in the next 12 months. Because deposits are viewed as a more stable form of financing than market-based sources such as repos, regulations — including a short-term liquidity standard approved almost two years ago — let banks hold fewer liquid assets against them.
Goldman Sachs said in its latest annual report that it’s already in full compliance with the pending short-term rule, called the liquidity coverage ratio. The firm was still evaluating the potential impact of the long-term rule as suggested by the Basel Committee on Banking Supervision. On Tuesday, regulators estimated almost all covered banks in the U.S. already meet the proposed rule set to take effect in 2018. And the few that don’t are almost at the mark.