Goldman Sachs launches net-based savings bank, GS Bank
26 April 2016
Goldman Sachs has launched GS Bank, an FDIC-insured internet-based savings bank. Any US citizen with an internet connection can open an account with just a single dollar.
With GS Bank, customers can expect an annual yield of 1.05 per cent, which is much higher than the average US savings bank yield of .06 per cent, but relatively in line with other online banks like Ally, which offered 1 per cent APY.
Deposit yields from online banks have been much higher than traditional banks, due mainly to the cost savings coming from not needing to support brick-and-mortar branches.
The launch of the bank resulted from Goldman's acquisition of GE Capital Bank, the online retail bank earlier run by General Electric's capital arm.
The GS Bank launch and GE Capital Bank acquisition comes as a move by Goldman to diversify revenue streams and strengthen liquidity in a market where traditional investment banking was not doing as well as it had done in the past.
GS Bank currently has total deposits of around $114 billion, which was could hardly be compared with the total deposits of large consumer banks like Wells Fargo and Bank of America.
According to commentators, the move represented a major change in business strategy for the most famous investment bank in the US, which had long focused on serving corporate clients. However, it also pointed to two larger trends in the financial industry - online banking and regulatory pressure.
GS Bank traces its origin to the days of the financial crisis. Goldman Sachs, which had till then not been classified as a bank for regulatory purposes, filed the paperwork to be regulated as a bank holding company (i.e., a company that owned banks) in order to gain access to the Federal Reserve's discount window.
Goldman's banking operations were quite limited and did not involve customers having bank accounts and deposits. Rather, it was focused on wholesale funding from large institutions, which is generally considered riskier.