A view of Silicon Valley Bank’s headquarters in Santa Clara, California, after the federal government intervened in the bank’s collapse, March 13, 2023.
Nicolas Liepins | Anatolian Agency | Getty Images
Regulators have reassured the public that the banking system is safe as new data showed that customers recently withdrew nearly $100 billion in deposits.
Treasury Secretary Janet Yellen, Federal Reserve Chairman Jerome Powell and more than a dozen other officials convened a special closed-door meeting of the Financial Stability Oversight Board on Friday.
A transcript of the session indicated that a Fed official in New York briefed the group on “market developments.”
“The Board discussed current conditions in the banking sector and noted that while some institutions are under stress, the US banking system remains sound and resilient,” the statement said. “The Council also discussed ongoing efforts by member agencies to monitor financial developments.”
There are no other details about the meeting.
The report, released shortly after the market closed on Friday, came around the same time as new Fed data showed bank customers collectively withdrew $98.4 billion from accounts for the week ended March 15.
This would have covered the period when the sudden bankruptcies of Silicon Valley Bank and Signature Bank shook the industry.
The data shows that most of the money comes from small banks. Large institutions saw deposits increase by $67 billion, while smaller banks saw outflows of $120 billion.
Withdrawals reduced total deposits to just over $17.5 trillion and represent about 0.6% of the total. Deposits have been in steady decline for the past year or so, falling by $582.4 billion since February 2022, according to seasonally adjusted Fed data released on Friday.
Money market funds saw assets rise in the past two weeks by $238 billion to $5.13 trillion, according to data from the Investment Company Institute through March 22.
Earlier this week, Powell also tried to reassure the public that the banking system is safe.
“You saw that we have the tools to protect depositors when there is a threat of serious harm to the economy or the financial system, and we are prepared to use those tools,” Powell said Wednesday during a press conference following the Fed’s decision to raise benchmark interest rates. percentages by another quarter of a percentage point. “And I think depositors should assume that their deposits are safe.”
Powell noted that deposit flows “have stabilized over the past week” following what he called “strong action” by the Fed to protect the system.
Banks are flocking to emergency lending facilities set up after the bankruptcies of SVB and Signature. Data released Thursday showed institutions borrowed an average of $116.1 billion a day from the central bank’s discount window, the highest level since the financial crisis, and withdrew $53.7 billion from the Term Financing Program of the banks.