The recent high-profile bank failures have triggered a wave of nervousness among bank customers, leading to a surge in deposits at large banks. According to sources, Bank of America, Wells Fargo, and Citigroup have all experienced a significant increase in deposits since Silicon Valley Bank encountered trouble last week.
Things Remain Unclear
The withdrawals from small and regional banks have reportedly eased, but the situation remains fluid. It is not yet clear how much money has been plowed into the big banks, but it is estimated to be in the billions or tens of billions of dollars.
Last Thursday, customers withdrew a staggering $42 billion from Silicon Valley Bank, draining the California lender of all of its cash. The bank was subsequently shut down by regulators, making it the second-largest bank failure in American history.
As a result of this incident, customers have flocked to the perceived safety of big banks. Their larger balance sheets and status as systemically important institutions make them a more secure choice in the minds of many consumers. Additionally, the government is more likely to come to the rescue of these institutions in the event of trouble, as it did in 2008.
US guarantees Silicon Valley Bank deposits amid bank crisis fears
What Do Analysts Say?
In the past week, Citigroup has been speeding up account openings across retail banking, small business lending, and wealth management. Meanwhile, Bank of America has reportedly taken in over $15 billion in new deposits in just a few days.
While big banks may be seen as a safer choice, it is worth noting that the FDIC insures deposits up to $250,000 per bank per borrower, regardless of the size of the bank. Analysts suggest that the FDIC’s decision to rescue uninsured depositors at Silicon Valley Bank and Signature Bank indicates that regulators would be forced to do the same if another bank collapsed.
Summing Up
Overall, the situation remains uncertain, and it is unclear how long the surge in deposits at big banks will continue. However, for now, nervous customers appear to be seeking the perceived safety of larger institutions.
