U.S. banking giant The Goldman Sachs Group, Inc. (NYSE:GS) has been forced to turn away customers from its easy-access online savings account, Marcus, after a £21 billion surge in deposits threatened to overtake regulatory limits.
The company decided to temporarily halt new applications following fears it would reach the Bank of England’s £25 billion cap, after which UK banking regulations demand the money would have to be relocated to a ring-fenced separate financial institution in order to protect the banking system.
Ring-fencing Marcus would involve having a designated board, limiting its ability to share capital with Goldman Sachs’ main investment banking arm and driving up costs that would jeopardise its competitive market rates.
Since its launch in 2018, Marcus’s league-topping 1% AER interest rates – compared to a UK market average of 0.3% – have drawn considerable attention and attracted more than 500,000 savers looking for substantial cash returns. The coronavirus pandemic has provided a window of opportunity for eager savers, with expenditure plummeting in the wake of the closure of the retail and hospitality sector.
Des McDaid, head of Marcus UK, explained, “We’ve really seen our growth accelerate under lockdown as people hold off on discretionary spending and take time to reorganise their finances and get the best deal for their money. Separating Marcus financially and operationally from Goldman Sachs would be a significant change to our low-cost business model, which allows us to pay consistently competitive rates to existing savers.”
The impact of the coronavirus pandemic has driven projections of annual household savings to £57 billion, with a New Policy Institute analysis predicting the wealthiest 20% of Brits to reduce their spending by £23 billion by the end of the year.
Sarah Coles, from investment firm Hargreaves Lansdown, commented, “The savings market has been engulfed by waves of cuts over the past few months, and Marcus’s easy-access account has been washed ashore. These waves are self-perpetuating. The most competitive account attracts too much money, so the bank cuts back.”
Marcus remains open for new accounts in the U.S. and has stated that it hopes to reopen to UK clients later in the year. Meanwhile, as of GMT-4 15:20 10/06/20, The Goldman Sachs Group, Inc. share price has dipped notably by 2.03% or $4.43 to $213.68. The company’s dividend yield stands at 2.29%.
