The outflow in the quarter isn’t a problem for banks, which are sitting on more deposits than they want. Deposits in the banking system usually stay relatively stable, but swelled by some $5 trillion in the past two years due to pandemic stimulus. Now, a series of Federal Reserve rate increases is taking some of that money out of the system, in part by decreasing demand for loans and increasing demand for government bonds.
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U.S. banks lost a record $370b in deposits last quarter
“I think we’re a lot closer to the floor in reserves than the consensus,” Mike Cloherty, the head of rates strategy at UBS, said at a panel discussion Friday hosted by the Bank Policy Institute.
