Here's How $78 Billion Exited The US Banking System In Just One Week

Recent numbers from the Federal Reserve Economic Data reveal that a staggering $78 billion exited American bank accounts from July 5 to the 12.

What Happened: According to the data, after a relatively stable two-week period, an exodus of deposits took place as big banks invested substantial amounts of cash in third-party intermediaries to attract new deposits.

The pressure is mounting on banks to compete with higher-yielding money market accounts, driving the need for strategies to retain and attract customers.

A report from S&P Global Market Intelligence showed that approximately 576 banks are overexposed to commercial real estate loans based on regulatory guidelines, representing an increase of 30% compared to a year ago. The banks are also preparing for potential repercussions in the commercial real estate sector due to the rise of remote and hybrid work environments.

Also Read: This Is What Whales Are Betting On JPMorgan Chase

Last week, JPMorgan Chase CEO Jamie Dimon told shareholders about the banking sector's need to keep up with demands for higher rates in order to avoid a further flight of deposits, the Wall Street Journal reported. 

"There is very little pricing power in most of our business, and betas are going to go up," Dimon said. 

Earlier this month, the Federal Reserve released its annual bank stress test, predicting that more than half a trillion dollars could exit the U.S. banking system in a "severely adverse" scenario.

The report revealed that 23 U.S. banks would "have sufficient capital to absorb more than $540 billion in losses and continue lending to households and businesses under stressful conditions." The losses are comprised of $424 billion in loan losses, which accounts for 78% of total losses, and $18 billion in additional losses from items such as loans booked under the fair-value option, accounting for 3% of total losses.

Now Read: Fed Pauses Interest Rates: A Short-Lived Break — Or The End For The Hiking Frenzy? 5 Economists React

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