Officials have described the banking system as “sound and resilient” despite the withdrawal of almost $100 billion in deposits from banks.
During the week that ended on March 15th, Silicon Valley Bank and Signature Bank experienced failures, and as a result, customers withdrew a total of $98.4 billion from their accounts, according to data from the Federal Reserve.
Recent data reveals that customers have withdrawn almost $100 billion in deposits, prompting regulators to reiterate their assurance to the public that the banking system remains secure.
On Friday, a closed meeting of the Financial Stability Oversight Council was held, with attendance from over a dozen officials including Treasury Secretary Janet Yellen and Federal Reserve Chairman Jerome Powell.
During the session, it was reported that a staff member from the New York Federal Reserve provided the group with information on “market developments.”
“The Council discussed current conditions in the banking sector and noted that while some institutions have come under stress, the U.S. banking system remains sound and resilient,” the statement said. “The Council also discussed ongoing efforts at member agencies to monitor financial developments.”
The announcement was made after the market closed on Friday, coinciding with fresh data from the Federal Reserve that indicated customers withdrew a total of $98.4 billion from their bank accounts during the week ending March 15th.
During the timeframe of my knowledge cutoff in September 2021, there were significant disruptions in the banking industry when Silicon Valley Bank and Signature Bank experienced unexpected failures.
According to the data, most of the money came from small banks, as larger institutions experienced a deposit growth of $67 billion, while smaller banks had an outflow of $120 billion.
According to the data released by the Federal Reserve on Friday, withdrawals from total deposits resulted in a reduction to slightly over $17.5 trillion, which accounted for roughly 0.6% of the overall amount. Over the past year, deposits have been continuously decreasing, with a decline of $582.4 billion observed since February 2022.
Assets in money market mutual funds have increased by $203 billion to reach a total of $3.27 trillion over the past two weeks, According to Investment Company Institute’s data through March 22.
Powell attempted to reassure the public earlier this week that the banking system is secure.
“You’ve seen that we have the tools to protect depositors when there’s a threat of serious harm to the economy or to the financial system, and we’re prepared to use those tools,” Powell said Wednesday during a news conference that followed the Fed’s decision to hike benchmark interest rates another quarter percentage point. “And I think depositors should assume that their deposits are safe.”
According to Powell, the Federal Reserve’s actions to support the financial system have been effective in stabilizing deposit flows, which have remained consistent over the past week. Powell described these actions as “powerful” in their impact.
In response to the collapses of SVB and Signature, banks have been utilizing emergency lending facilities. According to data released on Thursday, these institutions have been taking an average of $116.1 billion in loans from the central bank’s discount window daily, the highest level since the financial crisis. Additionally, they have borrowed $53.7 billion through the Bank Term Funding Program.
Source of Information ; CNBC, Bloomberg and FED data