After last month’s failure of two large regional banks, U.S. commercial bank deposits dropped in the second week of April, but smaller banks held steady.
The non-seasonally adjusted deposits at all commercial banks fell to $17.38 trillion during the week ending April 12, according to information made public by the Federal Reserve on Friday. This figure dropped from $17.43 trillion the previous week.
Fed’s Data Release on Bank Lending
The top 25 banks are responsible for the majority of the decline, per the data. Banks might be less able to lend if deposit levels decline, despite the fact that there was little evidence to support this in the Fed’s Friday data release.
The total amount of loans and leases held by all banks decreased from the previous week’s total of $12.06 trillion to $12.05 trillion.
Following the most aggressive round of rate hikes in four decades, which began in March of this year, Federal Reserve officials are keeping a close eye on bank lending and credit while determining whether to raise rates further.
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Increase in Interest Rates
Some policymakers are concerned that the turmoil that erupted in the banking sector last month after regulators shut down Silicon Valley Bank and Signature Bank could lead to significantly tighter credit, which would slow the economy and inflation while reducing the Fed’s room for maneuver.
Large-time deposits have reached their highest level since November 2009, when they reached $1.87 trillion, as a consequence of the increase in interest rates.
However, as a proportion of deposits, they remain quite low, accounting for only 10.8% of all deposits. This is the highest level since August 2020, and it represents an increase of more than 3 percentage points from their all-time low in January 2022.
In May of 2008, they reached a record-high share of 31%, which they have only reached a third of.
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