Updated Mar 27, 2023 - Economy

Small bank deposits fall, but not by much

Data: Federal Reserve; Chart: Axios Visuals
Data: Federal Reserve; Chart: Axios Visuals

While you were ducking out of the office early Friday afternoon for happy hour, the Federal Reserve released its weekly report on the U.S. banking system.

Why it matters: The figures showed that amid the turmoil that's engulfed the banking sector, there was an outflow of deposits from smaller banks in mid-March — though not on a scale that appears overly worrisome.

By the numbers: Deposits at U.S. banks outside the largest 25 fell by $108 billion in the week ended March 15, about a 1.9% drop. That followed the failure of Silicon Valley Bank and Signature Bank, and a concerted government action to reassure depositors in all banks that their money is safe.

  • Deposits at the top 25 banks rose by $120 billion in that same span, consistent with anecdotes that large depositors have been moving money from smaller institutions to large ones viewed as too big to fail.
  • The data is not granular enough to differentiate between mega-bank deposits like those at JPMorgan or Bank of America and large regional players like First Republic Bank.

Context: That amounts to the largest single-week drop in small bank deposits on record, in dollar terms, in data that goes back to 1973. However, in percentage terms, there were numerous weeks in the 1980s with steeper drops, as well as one in 2007.

  • It is a sign that while bank deposit outflows are real, it does not appear to have amounted to a cascade of withdrawals.

The bottom line: Most depositors at most banks are protected by the FDIC's $250,000 insurance and the government's actions to signal all depositors are likely to be safe worked.

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