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BLOOMBERG
Deposits at US banks fell sharply and lending declined by the most in nearly two years amid financial turmoil triggered by the collapse of several banks in March.
Commercial bank deposits dropped by $125.7 billion in the week ended on March 22, marking the ninth-straight period of declines, according to data by the Federal Reserve. At domestically chartered banks, deposits fell $84 billion, reflecting a decrease at the 25 largest institutions dropped. Deposits at small banks increased.
Overall lending fell by $20.4 billion, the most since June 2021 and due to a decline in commercial and industrial loans. Residential and commercial real estate loans, as well as consumer lending, increased from the prior week. By bank size, lending dropped at larger banks and picked up at smaller firms.
The report, known as H.8, includes the first two weeks following the demise of Silicon Valley Bank, and it will take time to assess the full impact of the ensuing financial turmoil and outflow of deposits from mid-size and small banks.
Figures showed that banks reduced their borrowings from two Fed backstop lending facilities in the most recent week, a sign that liquidity demand may be stabilising. The biggest 25 domestic banks account for roughly three-fifths of lending, although in some key areas smaller banks are the most important providers of credit.
Lending conditions were already tightening before the banking crisis after a year of interest-rate hikes by the Fed, and economists anticipate access to credit will get even more difficult for businesses and households.
US authorities responded to the bank failures to shore up confidence in financial system, offering additional backstops for banks in need of liquidity.