US banks made $1tn windfall profit by failing to pass on to savers the higher interest rates that were kept in place by the Federal Reserve for the past two and half years.

Lenders earned higher yields for their deposits at the Fed but kept rates lower for many savers, according the review of Federal Deposit Insurance Corporation data. The boost to the country’s in excess of 4, 000 banks has helped increase their profit margin. While rates on some savings accounts were raised in line with the Fed’s target of more than 5 per cent, the majority of depositors, especially those at the largest banks such as JP Morgan Chase and Bank of America received far less.

During the end of the second quarter, the average US bank was paying depositors only 2.2 per cent annual rate, according to regulatory data. This is higher than the 0.2 per cent they paid two years ago but definitely far lower than the Fed’s 5.5 per cent overnight rate that the banks themselves benefited.

JP Morgan 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 a profit of $1.3 Trillion in excess interest revenue for the banks.

When the Fed lowered its main rate last week by half a percentage point some US banks passed the cut onto the depositors as soon as possible, which shored up their margins.

Effectively lenders cashed in form 5.5 per cent, while the savers received on an average 2.2 per cent.