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Moody's: Slowdown in noninterest-bearing deposit growth is credit negative for US banks

During 2017, many large US banks reported a material slowdown in the growth of noninterest-bearing deposits, a credit negative, Moody's Investors Service says in a new report. This trend is likely to continue in 2018 as short-term interest rates rise further, which opens the possibility for an outright contraction in banks' noninterest-bearing deposits, though this could be mitigated by growth in low-cost interest-bearing alternatives, such as interest checking. "The deposits held in noninterest-bearing accounts are at the heart of a typical banking relationship, forming a cornerstone or 'crown jewel' in banks' franchises," Moody's Senior Vice President Allen Tischler says.