Bank of America Sees Uptick in Deposits After Bank Collapse, Insurers Step In
The Bank of America Corporation (BAC) has reportedly taken in more than $15 billion in new deposits in the span of just days, according to Bloomberg News. This is in the wake of the collapse of three smaller banks, which has led to a loss of confidence in the safety of regional lenders.
Insiders told Bloomberg that around $15 billion has been deposited to the Bank of America alone, and other large US banks such as JPMorgan Chase, Citigroup and Wells Fargo have also seen a significant increase in deposits. This is the largest shift of deposits in more than ten years, and customers are seeking refuge in the firms seen as “too big to fail”.
The Federal Deposit Insurance Corporation (FDIC) offers legal deposit protection of $250,000 per depositor per insured bank. To get even more coverage, customers can bank with a bank or credit union that maintains excess deposit insurance. Massachusetts-chartered savings banks and co-operative banks, for example, may provide additional deposit insurance coverage through the Depositors Insurance Fund. This private fund insures all deposits of participating banks in amounts exceeding the FDIC’s $250,000 maximum deposit insurance amount (SMDIA).
However, a spokesperson for Bank of America declined to comment on the development. JPMorgan and Citigroup also declined to comment. Even though the figures have not been disclosed yet, analysts suggest the sum is likely to be in the billions or tens of billions of dollars.
To draw in and keep deposits, certain banks have begun offering higher interest rates on deposits, including a few major banks that have launched appealing rates on digital savings accounts. Citizens Financial Group also said it had “seen higher than normal interest from prospective new customers over the past few days.”
It is unclear how much has been invested in large banks, though it is estimated to be in the range of billions to tens of billions of dollars. The circumstances remain changing. Information regarding short-term fluctuations in deposits is usually not revealed by banks, who instead choose to make this data public on a quarterly basis.
It has been suggested by analysts that, should another bank fail, the FDIC would be obligated to follow suit and rescue uninsured depositors, similar to their actions with Silicon Valley Bank and Signature Bank.
It may be advisable for a policy to encourage diversification of deposits and services among multiple banks.
0. “Depositors Flock to JPMorgan & Citi After SVB, Signature Closure” BeInCrypto, 14 Mar. 2023, https://beincrypto.com/jpmorgan-citigroup-juggling-account-deposit-requests-smaller-banks-drown/
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