US banks made a $1tn windfall from the Federal Reserve’s two-and-a-half-year era of high interest rates, an analysis of official data by the Financial Times has found.

Lenders got higher yields for their deposits at the Fed but kept rates lower for many savers, the review of Federal Deposit Insurance Corporation data showed. The boost to the US’s more than 4,000 banks has helped pad out profit margins.

While rates on some savings accounts were raised in line with the Fed’s target of more than 5 per cent, the vast majority of depositors, especially those at the largest banks, such as JPMorgan Chase and Bank of America, got far less.

At the end of the second quarter, the average US bank was paying its depositors interest at the annual rate of just 2.2 per cent, according to regulatory data that includes accounts that do not pay interest at all. This is higher than the 0.2 per cent they paid two years ago but far lower than the Fed’s 5.5 per cent overnight rate that the banks themselves can get.

At JPMorgan and Bank of America, annual deposit costs were 1.5 per cent and 1.7 per cent, respectively, according to this data.

Those lower payments to depositors generated $1.1tn in excess interest revenue for the banks, or about half of the total dollars banks brought in during that time, according to the FT’s calculations.

This is in sharp contrast to Europe, where some governments imposed windfall taxes on banks which benefited from higher interest rates.

The Fed tightened its main policy rate this week, cutting by half a percentage point. Some US banks sought to pass the cuts on to depositors as quickly as possible, a move that would shore up their margins.

Hours before the Fed rate cut on Wednesday, Citi told its employees at its private bank, whose wealthy clients typically receive preferential rates, that if the US central bank were to cut rates by half a percentage point the bank would do the same to its rate on accounts paying 5 per cent or more, according to a person familiar with the matter.

At JPMorgan, bankers have been told that clients with $10mn in cash or above would see their savings rates cut by 50bp and future cuts would move in lockstep with the Fed’s actions, people familiar with the matter said.

Because of the Fed’s rate cut, banks will “certainly” have “the ability to reduce deposit costs”, said Chris McGratty, head of US bank research at KBW. “The degree of aggressiveness will, I think, vary bank to bank.”

JPMorgan said the bank aimed to ensure a fair and competitive rate. Citi declined to comment. Bank of America declined to comment.

A report earlier this year from the Risk Management Association compared banks to petrol stations, which are typically quick to raise prices and slow to cut them. Banks, by contrast, are slow to raise the rates they offer on deposits and savings accounts but quick to cut them.

When the Fed began to tighten monetary policy in March 2022 many analysts predicted that competition from new financial technology companies and the growing ease with which consumers can move cash would force banks to dole out a greater share of the higher rates to their depositors.

But the FT’s calculations show that they were able to hold on to much of the benefit — although slightly less than in previous Fed tightening cycles.

The failure of Silicon Valley Bank and others in early 2023 forced many mid-sized and smaller banks to raise their rates in order to keep depositors from fleeing. Larger banks saw an influx of cash during the flight for safety, allowing them to delay the need to match higher rates elsewhere.

Overall US banks captured about two-thirds of the benefit of the Fed’s higher interest rates from March 2022 until the middle of this year, according to the FT’s calculations based on the latest data available. They paid depositors nearly $600bn in interest.

The last time the Fed raised interest rates, from early 2016 to until early 2019, US banks captured 77 per cent of the benefit.

Although the Fed has now begun to loosen monetary policy, bank stocks reacted positively on Thursday as investors bet that lower rates and a relatively healthy economy would create more demand for borrowing and boost investment banking dealmaking activity.

Nonetheless, the highest interest rates in more than a generation have pushed more money than ever, nearly $3tn, into certificates of deposit, which typically pay the highest rate of any bank deposits and also cannot be changed overnight.

As that money becomes unlocked, banks will be able to adjust their rates down, but not before, analysts said.

“It will be a slow grind down,” said Scott Hildenbrand, chief balance sheet strategist at Piper Sandler.

Unlock the Editor’s Digest for free

Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.

Spain has been heavily criticised for allegedly facilitating the exile of Venezuela’s main opposition presidential candidate, who under Spanish diplomatic protection was pressured into signing a document recognising President Nicolás Maduro’s victory.

Edmundo González, a former Venezuelan diplomat who the opposition says won the July election, left Caracas on September 7 to seek political asylum in Spain after spending weeks in hiding to dodge arrest. His departure dealt a major blow to the opposition, which had vowed to install González as president when Maduro’s current term ends in January.

Maduro has launched a sweeping crackdown since the election, in which he claimed to have won a third term in a result recognised by Russia, China, Iran and North Korea but not the west. The opposition has produced copies of about 80 per cent of the official tally sheets to prove that González trounced Maduro and the US has backed the claim.

González, who is 75 and has health problems, said this week that he was forced to sign under duress a letter recognising Maduro’s victory as a condition for being allowed to leave Venezuela.

Maduro’s government later published what it said were photographs of González signing the document inside Spain’s embassy residence in Caracas during a meeting with Maduro’s top political fixer Jorge Rodríguez and his sister Delcy, who is vice-president. The Spanish ambassador to Venezuela, Ramón Santos, was also present.

Spain’s conservative opposition leader Alberto Nuñez Feijóo has called for the resignation of Spanish foreign minister José Manuel Albares and the ambassador over the affair, saying Spanish diplomacy “cannot be at the service of a dictatorial regime”.

A senior Brazilian government official told the Financial Times that the Rodríguez siblings visited the residence to put pressure on González, which was something that “never should have been allowed”.

“Maduro pushed [González] out of the country through intimidation and . . . the Spanish state was the main facilitator,” the official said. “They have to explain what they did and be held accountable.”

The Spanish government rejects allegations that it had a role in forcing González out of the country and insists it had sought to ensure the opposition leader’s security and had been responding to his asylum request.

González had sheltered safely for almost five weeks in the Dutch embassy residence after the election but was only visited by the Rodríguez duo after moving to the Spanish residence.

González became depressed when he realised, about three weeks after the election, that the Maduro government was not going to collapse, and that he would either have to remain indefinitely under diplomatic protection in Venezuela or seek asylum abroad, according to a person close to the opposition.

Around this time he spoke to José Luis Rodríguez Zapatero, a socialist former Spanish premier close to Maduro’s government, who was a key figure in brokering the agreement that led to González’s departure, the person told the FT.

The Brazilian official said he understood that Zapatero had discussed the plan to exile González to Spain with the Rodríguez pair “and helped implement it”. Zapatero could not be reached for comment.

González was transferred to the Spanish embassy residence on September 5 believing that he would receive asylum in Spain, with the final details to be worked out with the ambassador. In the event, two days of negotiations ensued, during which the Rodríguez pair appeared in person with a document for González to sign.

Albares told reporters in Brussels on Thursday that his government had not invited anyone to visit González at the ambassador’s residence and “did not take part in any negotiation of any document”. The ambassador was present during the talks and appeared in the photographs because the residence only had one reception room, he added.

Christopher Sabatini, a Latin America expert at Chatham House, said the signature under such circumstances “violates the very notion of diplomatic asylum, making the Spanish government complicit in the Maduro government’s electoral theft and repression”.

In a statement on Thursday that was intended to calm the storm, González thanked Spain for its support and said: “I was not coerced either by the Spanish government or by the Spanish ambassador to Venezuela, Ramón Santos.” A Venezuelan opposition source in contact with González said he made the statement after an urgent request by Albares.

Venezuela’s government has attempted to exploit González’s departure as a propaganda coup, painting him as weak and cowardly. Jorge Rodríguez brandished a copy of the González document at a news conference on Thursday, describing it as “nothing other than a capitulation”.

Mocking González’s claim that he signed under duress, Rodríguez played excerpts of an audio recording that he said showed a convivial atmosphere with discussions lubricated by whisky. González said the meeting had been photographed and recorded without his permission.

“They showed up with a document that I would have to sign to allow my departure from the country,” González said. “In other words, either I signed or I would face consequences. There were some very tense hours of coercion, blackmail and pressure.”

Ryan Berg, director of the Americas programme at Washington think-tank CSIS, said: “The available evidence appears to suggest Spain played a role in enabling Edmundo González’s forced exile by the regime — a huge blow to Venezuelans who have hoped for change and voted for him.”

Unlock the Editor’s Digest for free

Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.

Darren Walker, the head of the $16bn Ford Foundation, has been one of the world’s leading philanthropists for more than a decade. He has rubbed elbows with US presidents and Elton John. 

He is also a zombie.

In August, Walker failed to win a majority of shareholder support for his re-election at apparel company Ralph Lauren, where he has been a board director for four years. He remains on the board.

This vote tally added Walker to a dubious list of “zombie” board members — ppeople who have failed to win at least 50 per cent support from shareholders and yet remain at their company’s top table. At the end of August, there were 35 zombie board directors at 27 US-based Russell 3000 companies, according to the Council of Institutional Investors, a lobbying group for pension funds.

While that is down from 41 last year and the phenomenon is largely confined to the US, the issue has angered investors who fear a global weakening of shareholder rights.

In the UK, the Financial Conduct Authority this year gave companies new power to adopt dual-class share structures, which give special powers to select shareholders. Also this year, Italy’s rightwing government, eager to boost domestic capital markets, proposed board director voting changes that were attacked by investors.

“My view is that the 50 per cent mark, when it comes to director elections, is not a huge ask,” said Donna Anderson, global head of corporate governance at TRowePrice, which manages $1.6tn. “It should be pretty hard to hold on to your seat if more than 50 per cent of shareholders vote the other way.”

“It just is so fundamental,” she said. “It is the principle of the thing.”

Vanguard, the world’s second-largest money manager, said “zombie directors can be indicators of weak shareholder accountability”.

“We view them as a serious governance concern,” a spokesman said. “If a board chooses to retain a zombie director, we believe it is crucial that they provide clear disclosure to investors regarding the rationale.”

Walker received just 47 per cent support from Ralph Lauren shareholders at the company’s August 1 annual meeting. In a regulatory filing, the company said it believed the low vote was due to its dual-class structure, “and not because of any specific objection to Mr Walker”.

In a statement to the Financial Times, New York-based Ralph Lauren said Walker “has been a valuable and additive member” of the board.

“We remain confident in the value that he brings to the company and we look forward to his continued service on our board,” it said. The Ford Foundation declined to comment.

Other companies with zombie director votes this year include AO Smith, which makes water heaters, Veeva Systems, a cloud-computing company, and the parent company of the Samuel Adams beer brand.

While asset managers’ gripes about governance have been waved off year after year, companies harbouring zombie directors have not so easily dodged pugnacious activist investors. 

Elanco, the former animal health unit of Bayer, had two directors who received less than 50 per cent support in 2022 and 2023. This year, activist Ancora attacked the company and demanded board seats, arguing that its board employed “shareholder-unfriendly policies”. In April, Ancora won two board seats at Elanco.

Most big stock markets around the world require a majority of shareholders to back a director in elections, meaning zombies cannot exist. But in the US, state law allows for plurality board elections, which essentially guarantee someone can stay on a board indefinitely unless challenged.

“Because the US has somewhat looser governance rules”, governments in the UK and Italy are considering weakening their corporate governance rules to attract more corporate listings, said Jen Sisson, chief executive of the International Corporate Governance Network, which represents BlackRock, Vanguard and other large asset managers.

“And that’s where investors are advocating so strongly to keep those standards high because we don’t want a race to the bottom of standards,” she said.

“Governance is one of those things that is all very boring until something goes wrong.”