• Nearly $47 billion has been added to US bank accounts in one week thanks to new strategies aimed at reversing deposit flight.
• Regional banks are borrowing an “eye-popping” amount of cash from the Federal Reserve and relying on third party, brokered deposits compiled by intermediaries.
• The amount of deposits in US banks now stands at $17.34 trillion – lower than the $18.10 trillion figure from one year ago.
Reverse Deposit Flight: Nearly $47 Billion Added To US Banking System In One Week
Nearly $47 billion has entered the US banking system in just one week as banks deploy new strategies to bring customers back. Depositors added exactly $46.95 billion to American bank accounts in the week ending June 21st, according to new stats compiled by the Federal Reserve Economic Data (FRED) system. The multibillion-dollar jump is thanks, in part, to new strategies designed to reverse deposit flight.
Strategies Deployed By Banks To Reverse Deposit Flight
Regional banks are borrowing an “eye-popping” amount of cash from the Federal Reserve, and are also relying on third party, brokered deposits compiled by little-known intermediaries to boost their bottom line. An analysis of quarterly regulatory filings for the 84 biggest banks shows not only how much they were borrowing through those channels at the end of March, but also the toll that it was just starting to take on some of their earnings. Those rising costs threaten to turn the most strained banks upside down: leaving them paying more to amass the cash they need than they earn by lending it out.
Increase In Brokered Deposits Visible At PacWest Bancorp
The surge in brokered deposits is most visible at Los Angeles-based PacWest Bancorp, which recorded a 1,774% increase in quarterly brokered deposits compared to a year earlier. Aside from expensive acquisition costs, these deposits are often referred to as “hot money” because they generally don’t sit in bank accounts as long as organic deposits do.
Total Bank Deposits At $17 Trillion
In total, the amount of deposits in US banks now stands at $17.34 trillion – significantly lower than its all time high figure of $18.10 trillion one year ago before deposit flight began taking place across many regional banks throughout America due multiple factors including pandemic related economic uncertainty and low interest rates set by federal agencies like The Federal Reserve Bank Of America (FED).
Overall this influx of nearly 47 billion dollars into U S banking systems over a seven day period shows promise for reversing deposit flight although it may be costly for regional banking institutions who have had to acquire funds through unconventional means such as borrowing from FED and leveraging third party brokerages who have access vast reserves of capital liquidity on behalf large investors or institutions making it possible reverse what was once a seemingly unstoppable trend among many local financial institutions across America during this unprecedented time period brought about by global pandemic effects coupled with record low interest rates set forth by central monetary authorities like FED .