First Citizens Bank branch in Dunwoody, Georgia on Thursday, March 23, 2023.
Elijah Novel | Bloomberg Getty Images
Regulators once again reassured the public that the banking system is safe, as new data showed customers withdrew nearly $100 billion in deposits.
Treasury Secretary Janet Yellen, Federal Reserve Chairman Jerome Powell and more than a dozen other officials held a special closed-door meeting of the Financial Stability Oversight Board on Friday.
A reading from the session showed that a New York Fed staff member briefed on “market developments.”
“The council discussed the current situation in the banking sector and noted that while some institutions are experiencing stress, the US banking system remains sound and resilient,” the statement said. “The board also discussed the efforts being made in member institutions to monitor financial developments.”
No other details were provided at the meeting.
The reading, released shortly after the market closed on Friday, came at the same time as new Fed data showed that bank customers collectively withdrew $98.4 billion from their accounts for the week ended March 15.
That would cover the period when the sudden failures of Silicon Valley Bank and Signature Bank rocked the industry.
Data shows that most of the money comes from small banks. Large institutions saw deposits increase by $67 billion, while smaller banks saw outflows of $120 billion.
These withdrawals brought total deposits to more than $17.5 trillion and represented about 0.6% of the total. Savings have fallen steadily over the past year, down $582.4 billion since February 2022, according to Fed data released on Friday.
Money market mutual funds have seen assets rise over the past two weeks, rising $203 billion to $3.27 trillion, according to Investment Company Institute data through March 22.
Earlier this week, Powell also sought to reassure the public that the banking system is safe.
“You’ve seen that we have the tools to protect depositors when there’s a dangerous threat to the economy or the financial system, and we’re ready to use those tools,” Powell said Wednesday during a press conference following the Fed’s decision to raise benchmark interest rates by another quarter percentage point. “And I think depositors should assume that their deposits are safe.”
Powell noted that deposit flows “have stabilized over the past week” following what he called “strong action” by the Fed to unwind the system.
Banks have flocked to the emergency lending facility set up after the failure of SVB and Signature. Data released Thursday showed that institutions took an average of $116.1 billion a day from the central bank’s discount window, the highest since the financial crisis, and got $53.7 billion from the Bank’s Term Funding Program.