Small banks managed modest gains in deposits during the second week of the recent liquidity crunch, while industrywide deposit outflows moderated, according to new data from the Federal Reserve.
The data on bank balance sheets, published late March 31, covers the week through March 22. Seasonally adjusted deposits at domestically chartered, US commercial banks fell by $83.97 billion, or 0.5%, to $16.037 trillion. At small banks, or banks excluding the 25 largest by domestic assets, deposits increased by $5.81 billion, or 0.1%, to $5.386 trillion. That included an increase in large time deposits for the small banks, which were up $7.76 billion, or 1.5%, to $519.60 billion.
During the week that ended March 15, a period that included the collapses of Silicon Valley Bank and Signature Bank, deposits at small banks fell by $196.38 billion, and industrywide deposits were down $129.28 billion as money flowed to big banks. The weekly shifts have been unusually large. At small banks, weekly deposit swings averaged $7.68 billion during the year through March 8.
Other data has shown that while funding stress among banks remains high, it has shown some signs of stabilization. Daily issuance of Federal Home Loan Bank debt, which reflects wholesale borrowing by banks, has subsided after a spike in the middle of March. The sum of direct borrowing from the Fed through the discount window and the recently created Bank Term Funding Program has been roughly stable for the two weeks through March 29 after an initial spike to $164.80 billion on March 15.
A buildup in cash partially reversed. Across domestically chartered banks, cash fell $66.97 billion, or 3.3%, following an increase of $412.65 billion, or 25.4%, the week prior. Other borrowing fell $7.12 billion, or 0.4%, after increasing $573.19 billion, or 54.4%, the week prior.
Banks continued to reduce securities holdings, with a $52.60 billion, 1.0% decline to $5.153 trillion.
The bank balance sheet data from the Fed is based on weekly reports by a sample of about 875 banks and foreign-related institutions, with amounts estimated for the rest. In a note, the Fed said data for the week ended March 15 had been revised because of a change in the way Federal Deposit Insurance Corp. bridge banks were incorporated into the small bank data.
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Money market fund inflows continued to be strong during the week of the most recent bank balance sheet data. Money market funds added $117.41 billion of total net assets during the week that ended March 22, about as much as the $120.93 billion they added during the week ended March 15, which covered the onset of the crisis. In the week through March 29, money market inflows slowed to $65.99 billion.
Shifts to money market funds can drain deposits, even though much of the money winds up recycled to banks as money market funds buy FHLB debt.
The liquidity crunch at banks is expected to crimp lending and the economy. Across domestically chartered banks, loans declined $17.14 billion, or 0.2%, to $11.110 trillion at March 22, after increasing $53.93 billion the week prior.