The US banking sector has overcome the earlier string of regional lender bankruptcies, but it has yet to regain public confidence. In the first quarter of 2023, deposit outflows have reached the highest level since 1984, a report by the Federal Deposit Insurance Corporation (FDIC) said.
The FDIC attributed the record deposit declines to the high-profile failures of several US banks. According to the report, the outflows were primarily from uninsured balances that exceeded $250,000. Total deposits dropped by 2.5% or $472 billion.
However, the FDIC noted that bank profits remained steady in the first quarter of 2023. Furthermore, the decline in deposits was offset by increased wholesale funding, which rose by 14.4% in the same period.
Earlier, the former vice president of Lehman Brothers Lawrence McDonald stated that 50 more US banks could go bankrupt if the US authorities fail to resolve the issue of capital outflows exceeding $250,000. According to McDonald, regional banks stand to lose billions of dollars, which would flow towards larger banks and, ultimately, US Treasury bonds.
