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Bank Deposits Worth Around $100 Billion Removed, And Authorities Praised The System For Being Stable And Robust

Bank Deposits Worth Around $100 Billion Removed, And Authorities Praised The System For Being Stable And Robust
As new information revealed that clients recently withdrew roughly $100 billion in deposits, regulators reaffirmed their assurance to the public that the banking system is secure.
Friday saw a special closed meeting of the Financial Stability Oversight Council that was attended by Treasury Secretary Janet Yellen, Federal Reserve Chairman Jerome Powell, and more than a dozen other government representatives.
An employee of the New York Fed updated the group on "market developments," according to the debrief from the meeting.
“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.”
No other information was given about the meeting.
The readout was given on Friday shortly after the market closed and coincided with the publication of new Fed statistics that revealed bank clients withdrew a combined $98.4 billion from accounts for the week ended March 15.
That would have included the time when the sector was shaken by the abrupt failures of Silicon Valley Bank and Signature Bank.
Statistics indicate that small banks provided the majority of the funding. While deposits at large institutions increased by $67 billion, they decreased by $120 billion at smaller banks.
The withdrawals reduced the overall amount of deposits to slightly over $17.5 trillion, or roughly 0.6% of the total. According to the Fed data issued on Friday, deposits have been steadily declining for the past year or so, falling $582.4 billion since February 2022.
According to Investment Business Institute data through March 22, assets held by money market mutual funds increased over the previous two weeks by $203 billion, reaching $3.27 trillion.
Powell aimed to reassure the public earlier this week that the financial 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.”
Following the Fed's "strong efforts" to support the system, Powell stated that deposit flows "had stabilized over the past week."
Since SVB and Signature failed, emergency loan facilities were put up, and banks have been swarming to them. Figures released on Thursday revealed that institutions borrowed $53.7 billion from the Bank Term Financing Program and an average of $116.1 billion per day from the central bank's discount window, which is the greatest amount since the financial crisis.

Christopher J. Mitchell

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