The numbers: Deposits at U.S. banks rose slightly in the last week of March, but lending to businesses declined for the second week in a row.
Deposits rose at both large and small banks, new data from the Federal Reserve showed Friday. Lending fell primarily at smaller institutions.
The figures are unadjusted.
Key details: Deposits at large U.S.-owned banks climbed by $49 billion to $10.75 trillion, based on the Fed’s weekly H8 survey.
Small banks saw an inflow of $26 billion in the week ended March 29,
So far, there’s not much sign of a big pullback in lending, however. Total commercial and industrial loans fell by a scant $9 billion last week to $2.8 trillion.
Outstanding loans are also much higher compared to one year ago and aren’t far from an all-time high.
Big picture: Wall Street
DJIA,
is watching the Fed report to see if bank deposits continue to decline or a so-called credit crunch emerges.
Deposits had fallen sharply earlier in March, particularly at small banks, after the collapse of Silicon Valley Bank in California, where deposit flight was a surprisingly critical factor.
Concerned there might be similar runs at other bank, the Federal Reserve quickly intervened with an emergency lending program to let banks get quick loans to if they needed to pay depositors without having to sell their securities at a loss. The effort appears to be working.
Some economists are forecasting that the stress on the banking system will the the sector to grow cautious in lending. At the same time, businesses and households could pull back spending due to uncertainty.
Fed officials have said in recent days that they will watch for the magnitude and duration of these expected effects. Some of the central bankers have said this stress raises the risks of recession.
Economists at Deutsche Bank forecast that a tightening of bank lending conditions could reduce growth by an amount roughly equivalent to two or three 25 basis points rate increases.
This post was originally published on Market Watch
