Washington Bank Cuts Prime to 8.75%; No Others Follow Suit

Riggs National Bank, the largest bank based in Washington, D.C., cut its prime rate by a quarter point to 8.75% Monday, but no other bank immediately followed suit.

Banks contacted by Reuters said they had no comment on the Riggs move down from the industrywide level of 9%. The bank is not known as a leader in the area of interest rates and is much smaller than the big city banks that normally lead the way.

A spokeswoman said the reduction reflects a drop in the bank’s funding costs, following a decline in credit market interest rates since the stock market plunged two weeks ago.

The prime rate, traditionally the rate charged to a bank’s best customers, had been as low as 8% in May. It rose to 9.75% at a handful of New York banks just before the steep decline in stock prices.

But a subsequent bond market rally has led to a lowering of the rates since then as investors responded to Federal Reserve Board action and fear of a recession. In the most recent move, major banks cut the rates by one-quarter of a percentage point to 9% on Oct. 22.