• US banks are seeing a huge increase in deposit flight from customers, with $78 billion exiting American bank accounts between July 5th and 12th.
• JPMorgan Chase CEO Jamie Dimon has issued a warning to shareholders on the banking sector’s need to keep up with customer demands for higher rates to avoid further deposit flight.
• A recent report from S&P Global Market Intelligence found 576 American banks are overexposed to commercial real estate loans based on regulatory guidelines.
Deposit Flight From US Banking System
US banks have experienced a large uptick in deposit flight from their customers over the past week. According to data compiled by the Federal Reserve Economic Data (FRED) system, approximately $78 billion exited American bank accounts from July 5th through the 12th.
JPMorgan CEO Issues Alert On Deposit Flight
The pressure is on for big banks to compete with higher yielding money market accounts, particularly as JPMorgan Chase CEO Jamie Dimon recently issued an alert to shareholders about avoiding further deposit flight due to increased demands for higher rates. Autonomous Research analyst Brian Foran said Dimon’s statement marked a “definite curb your enthusiasm moment” for banks after an industry-wide surge in second-quarter profits.
Impact of Remote and Hybrid Work Environments
Banks are also bracing for potential fallout in the commercial real estate sector due to remote and hybrid work environments that have become more popular since the start of the pandemic last year. According to a report from S&P Global Market Intelligence, this has led to an increase of 30% compared to one year ago, with 576 American banks now being overexposed to commercial real estate loans based on regulatory guidelines.
Competition With Money Market Accounts
Big banks are competing heavily with money market accounts, which offer higher yields than traditional savings accounts at many banking institutions. This competition has intensified as depositors look for alternatives that will give them better returns on their money while providing safety and liquidity. Banks must keep up with this demand or risk further exodus of deposits out of their systems as customers seek other options.
Consequences Of Deposit Flight
The consequences of widespread deposit flight could be significant if not addressed properly by banking institutions across the US economy. This could lead to lower profits and decreased lending activity which can stifle economic growth both domestically and globally if left unchecked by regulators or financial institutions themselves..