Seasonally adjusted, the top 25 banks in the U.S. have lost $90 billion. This is according to the Federal Reserve.
Newly released statistics say depositors pulled another $126 billion out of U.S. banks in the week ending March 22. This time, the nation’s major institutions were the source of the departure.
After authorities seized regional lenders Silicon Valley Bank and Signature Bank the previous week, the smaller banks have been able to normalize their outflows after suffering large withdrawals the week before. Seasonally adjusted, they saw a gain of $6 billion.
With a total of $17.3 trillion, industrial deposits are down 4.4% from the same time last year. Since July 2021, it has been the lowest it has been.
Before the Silicon Valley disaster, deposits had been dropping at all banks for the year’s first two months. The fourth quarter of 2022 saw a decline of 5% yearly in deposits throughout the banking industry.
According to many observers, this move is the result of the Federal Reserve’s concerted effort to reduce inflation.
When interest rates were low, financial institutions saw record levels of deposits. When the Federal Reserve raised rates to slow the economy, depositors looked elsewhere for better returns. In the second quarter of 2022, bank deposits fell for the first time compared to the previous year’s period.
There is a transfer of monies into money market accounts. A research paper from Bank of America indicates that since the beginning of January, investors have placed $508 billion into such funds.
The value of these holdings has increased by another $60 billion during the previous week.
Officials from the government and the banking sector have been trying to stop a flood of depositors since the March bank collapses. All depositors at the two banks were given protection by regulators who hoped this would quell public concern. Other regional banks were also offered assistance. To help stabilize the situation at one ailing regional bank, First Republic, eleven central banks pooled $30 billion in uninsured deposits.
All banks have the same difficulty due to deposit outflows: if they boost rates on deposits to maintain clients, they risk losing money. Like Silicon Valley Bank, they could go under if they lose too many customers and are forced to sell assets at a loss to cover customer withdrawals.
After $42 billion in withdrawals from Silicon Valley Bank clients in a single day, the bank was left with a negative cash position of $958 million. The bank, the 16th biggest in the United States, was seized.