Friday 02 Jun 2023
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(March 31): Deposits at all US commercial banks fell in the week ended March 22 to their lowest since August, but at a slower rate than the week before, and stabilised at small lenders seen as more vulnerable to outflows after the failure of Silicon Valley Bank (SVB).

Data released on Friday by the Federal Reserve showed the US$125.7 billion drop in deposits at all US banks in the week ended March 22 was roughly US$50 billion less than the record US$174.5 billion outflows in the first week after the collapses of SVB and Signature Bank.

Still, that left overall deposits nearly US$860 billion below their record high from last April, with more than a third of that drop —  about US$300 billion — occurring in the weeks since the collapse of SVB on March 10 and Signature two days later.

Revisions to the prior week's data showed deposit outflows in that first week of bank sector turmoil was almost double the US$98.4 billion initially estimated.

Deposits at small US banks edged up to US$5.386 trillion in the week ending March 22, from US$5.381 trillion the prior week. Deposits at the largest 25 banks by assets, meanwhile, fell to US$10.65 trillion from US$10.74 trillion. Deposit outflows from foreign banks with US operations accounted for the remainder of the week's decline.

The prior week's data was revised to reflect a change in the way the FDIC bridge banks created after the failures were incorporated into the small bank data, the Fed's release said.

US finance officials have repeatedly said that deposit flows have stabilised following the historic run on deposits at SVB and Signature, both of which had exceptionally high levels of deposits exceeding the FDIC's US$250,000 insurance limit.

US officials were forced to take the extraordinary step of guaranteeing all deposits at both banks, a measure that has drawn both praise and criticism and has created confusion over whether such blanket protection would be offered in other bank failures.

Despite worries among policymakers that the two failures and the upheaval they caused might instigate a credit crunch with banks recoiling from making loans, bank lending has yet to show a substantial drop except for one key business loan category: commercial and industrial loans.

Those dropped by nearly US$30 billion on the week, the biggest decline since June 2021. However, it is unclear if the drop was related to the collapse of the two banks.

Other categories of bank lending from commercial and residential real estate to consumer credit cards and car loans have shown little change since the banking turmoil erupted earlier this month.

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