Deposits at US commercial banks increased for the first time in almost a month at the end of March, indicating stabilization after the two largest bank failures since the financial crisis shook the banking system and unnerved depositors.
Deposits at all commercial banks increased to $17.35 trillion for the week ending March 29 on a nonseasonally adjusted basis, up from the downwardly revised $17.31 trillion for the previous week.
It was the first increase since the beginning of March and marked, for the time being, the end of a record outflow of deposits precipitated by the failures of Silicon Valley Bank and Signature Bank in the middle of last month. The second and third largest bank disasters in United States history compelled federal regulators to guarantee all deposits at both institutions and prompted the Federal Reserve to take emergency measures to restore confidence in the banking system.
Both the 25 largest banks by assets and the smallest and middle-sized banks saw an increase in deposits. After the back-to-back failures, small banks were particularly hard hit by deposit outflows, with some depositors transferring funds to larger institutions out of concern that funds in excess of the $250,000 per depositor federal insurance limit might be at risk.
On a nonseasonally adjusted basis, credit from U.S. banks fell by a record amount of more than $120 billion in the most recent week, but this was primarily due to banks selling $87 billion in securities to nonbanks, such as hedge funds. The Fed reported that banks sold that quantity of assets in each of the past two weeks, with the majority consisting of Treasuries and mortgage-backed securities.
The actions coincided with recent sales of various assets of the two defunct banks directed by the Federal Deposit Insurance Corporation, but the Fed did not specify if this was the reason for the divestments.