$910,000,000,000 Exits US Banking System in Just One Year As Depositors Take Flight

New numbers from the Federal Reserve are shining a light on just how much capital has exited US banks in the last year.

According to stats compiled by the Federal Reserve Economic Data (FRED) system, American banks have witnessed a whopping $910 billion in deposit flight since May of 2022.

In May of last year, the amount of capital held by banks on behalf of depositors sat at $18.06 trillion.

Today, that number is down to $17.15 trillion. And in the last week, $13 billion has exited the system.

Shares of regional US banks have been hammered following the failure of Signature Bank, Silicon Valley Bank and First Republic, along with the collapse of the Swiss-based banking giant Credit Suisse.

The Los Angeles-based PacWest and Phoenix-based Western Alliance have been hit particularly hard by traders on Wall Street.

Both financial institutions have released statements stating that since March 31st, they have not witnessed above average withdrawals.

The new numbers on bank withdrawals come after the Fed publicly revealed that more than 700 American banks are considered to be facing “significant safety and soundness risk” due to unrealized losses that exceed 50% of their capital.

The Fed specifically points to its own interest rate hikes as the key reason those banks are now in a precarious position.

On May 3rd, after hiking rates another 25 basis points, Fed Chair Jerome Powell said he believes the banking system is “sound and resilient” and conditions in the sector have broadly improved since early March.

According to CME Group’s FedWatch tool at time of publishing, 15.5% of traders believe Powell will once again raise rates one month from now.

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