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3 posts on "bank deposits"
May 11, 2023

Bank Funding during the Current Monetary Policy Tightening Cycle

Stephan Luck, Matthew Plosser, and Josh Younger

decorative photo: image of the outside of a silicon valley bank building.

Recent events have highlighted the importance of understanding the distribution and composition of funding across banks. Market participants have been paying particular attention to the overall decline of deposit funding in the U.S. banking system as well as the reallocation of deposits within the banking sector. In this post, we describe changes in bank funding structure since the onset of monetary policy tightening, with a particular focus on developments through March 2023.

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Posted at 7:00 am in Bank Capital, Banks, Federal Reserve, Financial Institutions | Permalink | Comments (1)
April 7, 2023

How Do Interest Rates (and Depositors) Impact Measures of Bank Value?

Stephan Luck, Matthew Plosser, and Josh Younger

Decorative photo: magnifying glass with percentage signs.

The rapid rise in interest rates across the yield curve has increased the broader public’s interest in the exposure embedded in bank balance sheets and in depositor behavior more generally. In this post, we consider a simple illustration of the potential impact of higher interest rates on measures of bank franchise value.

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Posted at 10:00 am in Bank Capital, Banks, Financial Institutions, Financial Intermediation | Permalink | Comments (1)
April 3, 2023

Monetary Policy Transmission and the Size of the Money Market Fund Industry: An Update

Gara Afonso, Marco Cipriani, Catherine Huang, Abduelwahab Hussein, and Gabriele La Spada

photo: The Marriner S. Eccles Federal Reserve building in Washington, D.C. Photographer: Stefani Reynolds/Bloomberg

The size of the money market fund (MMF) industry co-moves with the monetary policy cycle. In a post published in 2019, we showed that this co-movement is likely due to the stronger response of MMF yields to monetary policy tightening relative to bank deposit rates, combined with MMF shares and bank deposits being close substitutes from an investor’s perspective. In this post, we update the analysis and zoom in to the current monetary policy tightening by the Federal Reserve.

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Posted at 7:00 am in Federal Reserve, Financial Intermediation, Financial Markets, Monetary Policy | Permalink

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