Customers Say Goodbye to Traditional Banks: $60 Billion Withdrawn in Q1 2023
Three major US banks have experienced significant deposit outflows as customers seek higher returns on their savings.
In Q1 of 2023, almost $60 billion of deposits were withdrawn from Charles Schwab, State Street, and M&T. Charles Schwab saw the largest outflow, with depositors withdrawing $41 billion in just three months.
State Street’s deposits fell by 5%, while M&T Bank’s deposits dropped by 3%. The outflows have been attributed to the low-yield environment of traditional bank accounts, prompting depositors to seek higher-yielding opportunities like money market funds or Treasury bills.
The current US average interest rate for savings accounts is 0.24% APY, while short-term Treasury notes yield over 5%. The collapse of Silicon Valley Bank and other lenders has further accelerated the movement of cash out of US banks, with customers seeking safer alternatives for their deposits.
Signature Bank also recently closed its doors after losing approximately $17.8 billion in deposits.
In addition to the low-yield environment, the Financial Times reports that the Federal Reserve’s tight monetary policy has contributed to the deposit outflows.
The Fed’s benchmark rate of 4.75% to 5% has driven customers to withdraw their savings and seek higher-yielding opportunities elsewhere.