U.S. Banks Deploy ‘Expensive Fix’ To Stop Deposit Flight, Bringing in $46,950,000,000 in Just One Week
As financial institutions in the United States try new tactics to win back consumers, about $47 billion flooded the banking system last week.
Bloomberg attributes some of the multibillion-dollar increase to measures to prevent further deposit outflows.
The Federal Reserve loans regional banks an “eye-popping” amount of money, and they also depend on third-party, broker-compiled deposits to increase their profits.
An examination of the quarterly regulatory filings of the 84 largest banks reveals not only the total amount of money they had borrowed via these channels as of the end of March but also the beginning of a significant hit to their profits due to this trend.
The most financially precarious banks may have their worlds turned upside down if they had to spend more to accumulate the capital they needed than they earned by lending it out due to these escalating expenses.
PacWest Bancorp, situated in Los Angeles, has had the most significant rise in brokered deposits, 1,774% in the most recent quarter compared to the same period a year earlier.
In addition to the high fees associated with acquiring them, “hot money” is a term used to describe deposits made via a broker since they tend to leave bank accounts quickly.
Bank deposits in the United States have risen to a record high of $17.34 trillion. That sum may have increased recently but is still down from last year’s record high of $18.10 trillion.