- Asset managers are under pressure from regulators to "stress test" their portfolios against a bond market rout, says State Street (STT -2.5%) CEO Jay Hooley, speaking after his company reported earnings this morning. As a result, those asset managers are building up excess deposits at the bank - and that's money State Street can't earn a whole lot on.
- Excess deposits at State Street rose to $54B at the end of Q1 vs. $52B three months earlier, even as the bank tried to discourage growth by introducing some fees. “The irony is that an asset manager’s excess liquidity ends up being our excess deposits,” says Hooley.
- “It is early days and the stress testing process is maturing,” says Hooley. “The more sophisticated the process, the more refined the outcomes.” In other words, Hooley is hopeful managers will find a different way to cut risk other than moving to cash.
- Source: FT
- Previously: Margins squeezed, but fee revenue gains at State Street (April 24)