Moody’s has distributed a report on deposits held in US banks showing that the Federal Reserve’s H.8 data, which presents an estimate of the weekly aggregate balance sheet for the US banking system, released last Friday (March 24), showed a shift in deposits from small banks to large banks. Moody’s states that this is the first decline in small bank deposits since 1986.
The exit is due to fear of greater contagion impacting smaller or regional banks. Customers are moving money to systemically important banks – the too-large-to-fail banks like JP Morgan or B of A etc.
Moody’s adds that at the liability side of US banks’ balance sheets, the weekly data showed that large banks gained $120 billion in deposits while small banks lost $109 billion.
Deposits have also left the US banking system for money market mutual funds when one includes foreign branches and agencies.
The data indicates a decline in US banking system deposits of $53 billion for the week, while the Investment Company Institute’s data on US money market mutual fund balances over the same period shows a weekly growth of $121 billion.