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3 posts on "deposits"
March 27, 2024

Deposits and the March 2023 Banking Crisis—A Retrospective

Stephan Luck and Matthew Plosser

Photo: Man depositing check by phone while sitting at a table in a restaurant

In this post, we evaluate how deposits have evolved over the latter portion of the current monetary policy tightening cycle. We find that while deposit betas have continued to rise, they did not accelerate following the bank runs in March 2023. In addition, while overall deposit funding has remained stable, we find that the banks most affected by the March 2023 events are offering higher deposit rates and are growing their deposit funding relative to the broader banking industry.

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Posted at 7:00 am in Banks | Permalink
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)
November 21, 2022

How Do Deposit Rates Respond to Monetary Policy?

Alena Kang-Landsberg and Matthew Plosser

Decorative: image of buildings with dollars superimposed and chart with arrows in upward direction with a percentage sign

When the Federal Open Market Committee (FOMC) wants to raise the target range for the fed funds rate, it raises the interest on reserve balances (IORB) paid to banks, the primary credit rate offered to banks, and the award rate paid to participants that invest in the overnight reverse repo (ON RRP) market to keep the fed funds rate within the target range (see prior Liberty Street Economics posts on this topic). When these rates change, market participants respond by adjusting the valuation of financial products, of which a significant category is deposits. Understanding how deposit terms adapt to changes in policy rates is important to understanding the impact of monetary policy more broadly. In this post, we evaluate the pass through of the fed funds rate to deposit rates (that is, deposit betas) over the past several interest rate cycles and discuss factors that affect deposit rates.      

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Posted at 7:00 am in Banks, Central Bank, Fed Funds | Permalink

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