By Jeffry Bartash
No sign yet of an emerging U.S. ‘credit crunch’
The numbers: Small U.S. banks managed to stop hemorrhaging deposits last week, but larger banks saw a bigger outflow of cash, new data from the Federal Reserve showed Friday.
Key details: Deposits at smaller banks fell by a scant $1.1 billion in the week ended March 22, according to the Fed’s weekly H8 survey.
By contrast, deposits plunged by a revised $184 billion in the prior week immediately after the collapse of Silicon Valley Bank earlier this month.
The latest figures suggest an emergency lending program set up by the Federal Reserve to stop bank runs at smaller institutions and stabilize the financial system appears to be working.
Larger U.S. banks, on the other hand, did show a decline in deposits. They fell by $97 billion and gave back most of the increase from the prior week.
Initially investors at smaller banks shifted their money to larger ones for safe-keeping.
Investors are storing a record amount of assets in money-market funds, according to separate data from the Investment Company Institute
Total U.S. deposits, including those at foreign-owned banks, declined by $132 billion last week to $17.4 trillion.
Overall U.S. bank deposits have fallen gradually since last year as clients sought higher returns. Ultimately the decline in deposits could reduce bank lending and harm the economy.
The figures are unadjusted.
Big picture: Wall Street is watching the Fed report to see if bank deposits continue to decline and a so-called credit crunch emerges.
So far there’s little evidence of a sharp reduction in lending. Commercial and industrial loans rose by $4 billion last week, mostly through foreign-owned banks. Business loans at both large and small U.S. banks were basically unchanged.
Economists say a credit crunch could take a few months to materialize.
-Jeffry Bartash
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04-01-23 1237ET
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