Despite assurances offered by regulators that the banking system was “sound and resilient,” apprehensive US customers collectively withdrew close to $100 billion from bank accounts in the wake of the recent bank collapses, according to Federal Reserve data.
A larger part of the $98.4 billion pulled from accounts for the week ending on March 15 came from small banks, figures show. Amid an outflow of $120 billion, total deposits were revealed to be down to just over $17.5 trillion, representing about 0.6% of the overall total.
The data published by the United States central bank shows that the withdrawals came on the heels of the abrupt collapses of Silicon Valley Bank (SVB) and Signature Bank, as well as the takeover of Credit Suisse by UBS Group AG. The multinational investment bank and financial services company agreed to take over troubled Credit Suisse Group AG on March 19 in a $3.2 billion deal. Since then, a study by the Social Science Research Network has estimated that nearly 200 other smaller banks are at risk of failing.
As the fallout from the toppled banks sent shudders throughout the global market, the Federal Reserve announced that emergency lending facilities would be available to eligible depository institutions.
In the US, a chorus of voices from Treasury Secretary Janet Yellen, Federal Reserve Chairman Jerome Powell, and other officials sought to allay fears of further exacerbation. As the Financial Stability Oversight Council met for a closed meeting on March 24, a readout cited by media stated:
“The Council discussed current conditions in the banking sector and noted that while some institutions have come under stress, the US banking system remains sound and resilient. The Council also discussed ongoing efforts at member agencies to monitor financial developments.”
The Fed’s Jerome Powell also touted to the public the safety of the banking system, saying:
“You’ve seen that we have the tools to protect depositors when there’s a threat of serious harm to the economy or to the financial system, and we’re prepared to use those tools. And I think depositors should assume that their deposits are safe.”
According to Powell, who spoke at a news conference after the Federal Reserve opted for an interest rate increase of 25 basis points, deposit flows had “stabilized over the past week” as a result of “powerful actions” taken by the Fed.
However, despite all the assurances, a clear warning came from International Monetary Fund (IMF) Managing Director Kristalina Georgieva on Sunday. Vigilance appeared to be the word of the day, as Georgieva gave a speech at the China Development Forum. The IMF chief conceded that 2023 would be a challenging year, with global growth “slowing to below 3 percent” and the “outlook for the global economy over the medium-term likely to remain weak.”
Warning of “exceptionally high” uncertainties and heightened risks to financial stability, when higher interest rates are being increasingly resorted to as a tool to battle raging inflation, the IMF stressed the continued need for policymakers’ vigilance.
“We continue to monitor developments closely and are assessing potential implications for the global economic outlook and global financial stability. We are paying close attention to the most vulnerable countries, in particular low-income countries with high levels of debt,” Kristalina Georgieva stated.

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