People Have Taken Out $100 Billion from Big Banks

The latest study shows people have taken out nearly $100 billion from big banks such as JPMorgan, Bank of America, Citi, and Wells Fargo during the first quarter of 2023.

Financial Times reported that analysts project that depositors looking for high returns from money market funds and other alternatives withdrew nearly $100 billion from big banks.

Federal Reserve data showed that bank customers collectively pulled $98.4 billion from accounts.

Data show that the bulk of the money came from small banks.

Large institutions saw deposits increase by $67 billion, while smaller banks saw outflows of $120 billion.

The withdrawals brought total deposits down to just over $17.5 trillion and represented about 0.6% of the total.

Deposits have been on a steady decline over the past year or so, falling $582.4 billion since February 2022, according to seasonally adjusted Fed data, per CNBC.

“Banks have been flocking to emergency lending facilities set up after the failures of SVB and Signature.

Data released showed that institutions took a daily average of $116.1 billion of loans from the central bank’s discount window, the highest since the financial crisis, and have taken out $53.7 billion from the Bank Term Funding Program.”

Are Big Banks in Trouble?

This second quarter, banks are laying off thousands of employees globally.

The latest 1,000 bank employee layoff by JPMorgan (NYSE:JPM) is creating panic in the banking industry.

About 1,000 First Republic (OTCMKTS:FRCB) employees have lost their job across all of First Republic’s businesses, per Financial Times.

This equates to about 15% of its roughly 7,000 employees.

“The cuts are a further blow to First Republic employees, who have already had a challenging two months.

Following the collapse of Silicon Valley Bank and Signature Bank in March, customers of First Republic withdrew tens of billions of dollars of deposits and the lender was ultimately shuttered by US regulators and sold over a weekend to JPMorgan,” said FT.

Within the next 30 days, JP Morgan will notify First Republic employees of their job status, and not everyone will be offered a position with the bank.

For those who are offered a job, they may be given either a permanent role or limited-term employment ranging from three to 12 months.

Since the takeover, First Republic employees have been left in the dark about their future with the company.

Read: JPMorgan to Close 21 First Republic Branches Amidst Latest Layoff

Nearly 190 Banks at Risk of Failure

A new study shows that nearly 190 banks are on the verge of collapsing.

Several reports throughout the year have highlighted a crisis amongst the banking system.

After the collapse of Silicon Valley Bank and Signature Bank in March and First Republic Bank in April, a study on the fragility of the U.S. banking system found that 183 more banks are at risk of failure even if only half their uninsured depositors—those with deposits greater than $250,000—decide to withdraw their funds, USA Today reported. 

“The recent declines in bank asset values very significantly increased the fragility of the U.S. banking system to uninsured depositor runs,” economists wrote in a recent paper published on the Social Science Research Network.

“So, our calculations suggest these banks are certainly at a potential risk of a run, absent other government intervention or recapitalization.” 

Regional banks are failing because the Federal Reserve’s aggressive interest rate hikes to clamp down on inflation have eroded the value of bank assets such as government bonds and mortgage-backed securities, reported USA Today.

“If a ‘confidence crisis’ can happen to First Republic, it can happen to any bank in this country,” says Jake Dollarhide, Chief Executive Officer of Longbow Asset Management.

A run on these banks could pose a risk to even insured depositors—those with $250,000 or less in the bank—as the FDIC’s deposit insurance fund starts incurring losses, the economists wrote. 

Read: NYC is Freezing New Bank Deposits at Capital One

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