Small US banks lose $109 billion in deposits in a single week

Bank customers shifted their deposits to large firms from smaller ones amid a banking crisis that led regulators to seize two regional lenders in quick succession.

Weekly data collected by the Federal Reserve showed that large banks gained $120 billion in deposits while their smaller counterparts lost $109 billion, Moody’s Corp. said in a research report, citing figures released Friday.

Small banks’ total deposits fell 1.5% in the week through March 15 from a year earlier, the first annual decline since 1986.

The latest figures “are of particular interest as they include developments in the balance sheet of the U.S. banking system” in a period marked by “very significant funding strains and deposit runs at some banks following the failures of Silicon Valley Bank and Signature Bank,” Moody’s analysts led by Jill Cetina and David Fanger said in the report.

SVB Financial Group’s Silicon Valley Bank collapsed into Federal Deposit Insurance Corp. receivership on March 10, 2023 Two days later, Midtown-based based Signature Bank became the third-largest bank failure in U.S. history, and its deposits and some of its loans were later taken over by New York Community Bancorp’s Flagstar Bank.

On Sunday, First Citizens BancShares Inc. agreed to buy Silicon Valley Bank, transforming the Raleigh, North Carolina-based firm into one of the top 15 U.S. banks.

Across lenders, deposits appear not only to have shifted from smaller banks to their larger peers, but also to have left the country’s banking system for money-market mutual funds, when foreign branches and agencies are included, according to the Moody’s report. The big firms encompass the 25 largest banks, while small domestically chartered banks include all those ranked lower.

The non-seasonally adjusted Fed figures suggest a decline in banking system deposits of $53 billion for the week, while Investment Company Institute data on U.S. money-market mutual fund balances for the period show growth of $121 billion, Moody’s said.