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- 1 The performance of big giants in terms of deposit drains, including JPMorgan Chase and Wells Fargo slowed down in recent days.
- 2 The global banking system shed light on the situation as it faced $1.55T deposit drains in the last year.
On September 8, a new report from Yahoo Finance on the global banking system completely shocked the economic landscape. The data represents the suffering of the global banking system in the past few months. The heavy drain of deposits from small banks to big financial institutions including JPMorgan Chase, Wells Fargo, CitiBank, and Bank of America reported a performance decline.
What Actually Happened?
In search of higher profits and yields, wealthy clients are shifting from small banks to big financial institutions, posing challenges for the global banking system.
The report from Federal Research of St. Louis states that US banks experienced a $605 Billion deposit drain in a year. The actions of wealthy clients also put banks in France, Spain, Germany, and Italy as well as Nordic and Benelux regions in danger. Deposits at these banks dropped by around $950 Billion in the past 1 year.
According to the report of S&P Global Market Intelligence, the grand total of the deposit drainage hit $1.55 Trillion, affecting the whole global banking system. The intended actions of wealthy clients in the hunt for higher profits simply damage the foundations of the financial giants of America. The chapter begins in January when deposits at all the US banks have fallen by $371 Billion, and money market funds rose by more than $769 Billion. The situation remained the same till June end, deposits continued to fall for giant banks, however, the outflows slowed down in summer.
In August 2022, deposits at large banks were around $18.09 Trillion and fell to $17.15 Trillion in June 2023, showing a huge deposit drainage in the US banking system.
Why do Wealthy Clients Matter for the Banking System?
Keeping these depositors is one of the main challenges the US banking system is facing at present. Higher interest rates, eroding profitability, and rising funding rates simply diminish the interest of wealthy clients in the US banking system. The result of this is that giant players in the US market including JPMorgan Chase, Wells Fargo, CitiBank, and Bank of America reported a performance sag.
Data collected by Curinos on the other hand, represents that corporate accounts and wealth management noted a 13% deposit decline from the beginning of the year.
In order to remain competitive in the global banking sector, the supergiants including JPMorgan Chase, Wells Fargo, CitiBank, and Bank of America come up with new offerings. New offers for certificate of deposit (CD) saving accounts with money-saving accounts are assumed to offer a win-win game. The offer verified hundreds of Billions of dollars of inflows over the last year.
US bank stocks ended in August with the year’s worst monthly performance and require rapid recovery in order to remain aggressive and competitive in the financial world.
Conclusion
Wealthy clients’ intended actions of shifting money from small banks to larger institutes somehow affected the performance of the US banking system. The global banking system suffered a $1.55 Trillion in deposit drainage in the past year. To recover the same and attract wealthy clients, financial leaders of the US including JPMorgan Chase, Wells Fargo, CitiBank and Bank of America are coming up with new offerings.
Nancy J. Allen is a crypto enthusiast, with a major in macroeconomics and minor in business statistics. She believes that cryptocurrencies inspire people to be their own banks, and step aside from traditional monetary exchange systems. She is also intrigued by blockchain technology and its functioning. She frequently researches, and posts content on the top altcoins, their theoretical working principles and technical price predictions.
