📖 Your Q2 Earnings Guide: Discover the Stocks ProPicks AI Highlights to Jump Post-EarningsRead more

Small U.S. banks see record drop in deposits after SVB collapse

Published 03/24/2023, 04:33 PM
Updated 03/24/2023, 06:30 PM
© Reuters. FILE PHOTO: A Silicon Valley Bank employee holds the door for a customer at the bank's branch office in downtown San Francisco, California, U.S., March 13, 2023. REUTERS/Kori Suzuki

(Reuters) -Deposits at small U.S. banks dropped by a record amount following the collapse of Silicon Valley Bank on March 10, data released on Friday by the Federal Reserve showed.

Deposits at small banks fell $119 billion to $5.46 trillion in the week ended March 15. That was more than twice the previous record drop and the biggest decline as a percent of overall deposits since the week ended March 16, 2007.

Borrowings at small banks, defined as all but the biggest 25 commercial U.S. banks, increased by $253 billion to a record $669.6 billion, the Fed's weekly data showed.

"As a result, small banks had $97 billion more in cash on hand at the end of the week, suggesting that some of the borrowing was to build war chests as a precautionary measure in case depositors asked to redeem their money," Capital Economics' analyst Paul Ashworth wrote.

SVB collapsed after it was unable to meet a swift and massive run by depositors who took out tens of billions of dollars in a matter of hours.

Deposits at large U.S. banks rose $67 billion in the week to $10.74 trillion, the Fed data showed.

Overall U.S. bank deposits have been in decline after sharply rising in the wake of pandemic aid in 2020 and early 2021.

The reversal in the trend for large banks was notable. The rise equates to about half as much as the deposit decline at small banks, suggesting that some of the cash may have gone into money market funds or other instruments.

Large banks also increased borrowings in the week, by $251 billion.

© Reuters. FILE PHOTO: A Silicon Valley Bank employee holds the door for a customer at the bank's branch office in downtown San Francisco, California, U.S., March 13, 2023. REUTERS/Kori Suzuki

It was unclear if the shift in deposits out of small banks will persist.

"Deposit flows in the banking system have stabilized over the last week," Fed Chair Jerome Powell said on Wednesday.

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.