New Report Reveals Massive Deposit Flight from Banks, Particularly Among Wealthy Clients
Recent data from the Federal Reserve of St Louis indicates that US banks have experienced a staggering $605 billion in deposit flight over the past year. Additionally, data compiled by S&P Global Market Intelligence reveals that total deposits in several European countries have dropped by approximately $950 billion within the same time frame, resulting in a grand total of $1.55 trillion in deposit flight. The primary reason for this trend is the pursuit of higher returns, with wealthy clients causing the most damage to the bottom lines of major US banks. JPMorgan Chase, Wells Fargo, Bank of America, and Citi all reported deposit outflows in their wealth management divisions during the second quarter of this year. Furthermore, Curinos data shows a 13% deposit exodus from wealth management and corporate accounts from the beginning of the year through July. To combat this, the banks have launched new offers for certificate of deposit (CD) savings accounts to compete with money-market accounts, which have witnessed significant inflows in the past year. Curinos reports that institutional deposit flight from major US banks paused in July, with August data yet to be released.
Hot Take
The substantial deposit flight from banks, particularly among wealthy clients, reflects a growing trend of individuals seeking higher returns on their investments. This highlights the need for banks to adapt their strategies and offerings to meet the changing demands of their clientele. The launch of new savings account options, such as CD accounts, demonstrates the banks’ efforts to remain competitive in the market. However, it remains to be seen whether these measures will effectively counter the appeal of alternative investment options. As the financial landscape continues to evolve, banks must prioritize innovation and meet the expectations of their customers to prevent further deposit flight.
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