Reporter Park Ga-young of Money Today | 2023.04.01 14:35
In the aftermath of the Silicon Valley Bank (SVB) bankruptcy, panic was created in the financial market, and deposits were withdrawn from US banks on a large scale.
According to Bloomberg News on the 31st (local time), the US Federal Reserve System (Fed · Fed) reported that US commercial banks withdrew deposits of US$ 125.7 billion (approximately 165 trillion won) from the 16th to the 22nd.
As a result, total deposits of U.S. banks fell 4.4 percent year-on-year to $17.3 trillion (approximately 2 trillion won). This is the lowest level since July 2021.
Customers who withdrew money from banks flocked to assets with lower investment risks. According to Bank of America (BoA), money market funds (MMFs), a type of mutual fund that invests primarily in low-risk securities, received $60 billion in inflows last week. In this regard, JP Morgan reported that the amount of money transferred from small and medium-sized banks to large banks and MMFs reached 55 million dollars in the past two weeks.
Banks are facing a problem of deteriorating profitability due to deposit outflows, Yahoo Finance pointed out. In order to retain customers, deposit interest rates must be raised, which makes it difficult to maintain profitability. “If it loses too many customers, as SVB did, the bank may have to take a loss and sell assets to cover withdrawals,” the media explained.
SVB was closed on the 10th. The loss on valuation of securities due to the increase in the US interest rate was known to the outside world, and immediately a bank run (mass withdrawal of deposits) occurred, resulting in bankruptcy at a high speed in 36 hours. Since then, the closure of small and medium-sized banks in the U.S. and the liquidity crisis at Credit Suisse (CS) continued, further instigating the global financial system.
The market seems to be gradually dispelling fear. On this day, the three major indices of the New York Stock Exchange ended trading with a strong 1% level. The weekly increase was in the 3% range. This market response is interpreted thanks to the prompt response of the US federal authorities. The U.S. authorities put all their efforts into preventing the spread of systemic crisis by supplying large-scale liquidity.
[저작권자 @머니투데이, 무단전재 및 재배포 금지]