The bankruptcy crisis of Silicon Valley and Signature banks prompted Americans to withdraw nearly US$100 billion in deposit funds from banks, despite attempts by federal regulators to reassure clients that the banking system in the United States is safe.
US Treasury Secretary Janet Yellen, Federal Reserve Chairman Jerome Powell, and more than 10 other officials held a special closed-door meeting of the Financial Stability Monitoring Board yesterday, Friday, during which they were briefed on market developments, according to CNBC.
“The board discussed current conditions in the banking sector and noted that while some institutions are under pressure, the US banking system remains healthy and resilient,” the officials said in a statement after the meeting.
The statement added, “The board also discussed ongoing efforts at the level of member agencies to monitor financial developments.” No other details were released about this meeting.
This statement came at about the same time that new data issued by the Federal Reserve (the US central bank) showed that bank customers in the United States collectively withdrew about US$98.4 billion from their accounts during the week ending March 15th.
This period roughly covers the sudden bankruptcy announcements of Silicon Valley and Signature, which shook the banking sector across the United States.
The data shows that the bulk of the money withdrawn came from small banks.
Large banks saw deposits increase by US$67 billion, while smaller banks saw withdrawals of US$120 billion.
These withdrawals dropped total deposits to just over US$17.5 trillion, which is about 0.6 percent of the total volume.
Deposits have declined over the past year, down US$582.4 billion since February 2022, according to Fed data.
Money market investment funds witnessed a rise in the volume of assets during the past two weeks, an increase of US$203 billion to reach US$3.27 trillion, according to recent data.
Last week, Federal Reserve Chairman Jerome Powell sought to reassure the public that the banking system was safe.
Powell said, during a press conference last Wednesday, “You have seen that we have the tools that enable us to protect depositors when there is a threat of serious harm to the economy or the financial system, and we are ready to use these tools … and I believe that depositors should assume that their deposits are safe”.
Powell indicated that the outflow of deposits “stabilized over the past week,” after he described it as “strong measures” taken by the Federal Reserve to support the banking system, according to CNBC.
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