Image Source: Pexels

Even before last week's chaos surrounding New York Community Bancorp (NYCB), US bank deposits (non-seasonally adjusted) had been collapsing. But this week - amid the chaos - deposits exploded $147BN higher (NSA)...

Source: Bloomberg

On a seasonally adjusted basis, total deposits rose a stunning $101BN last week - the biggest weekly increase since June 2021...

Source: Bloomberg

Excluding foreign deposits, domestic banks saw the largest deposit inflows since May 2021 (+$81BN SA) with Large banks +$61.5BN and Small banks +19.5BN. On an NSA basis, domestic deposits jumped $131BN, with Large banks adding $103BN and Small banks adding $28BN...

Source: Bloomberg

On the other side of the ledger, loan volumes increased for the 4th week in a row with large banks adding $17.9BN and Small banks adding $5.4BN...

Source: Bloomberg

And finally, as a reminder - despite the rebound off the lows this week in regional bank shares, which must mean everything is awesome, right? - the regional bank crisis is still very much alive as evidenced by the red line below (without The Fed's imminently expiring BTFP facility)...

Source: Bloomberg

...what else are big banks (green line) going to do with all that cash burning a hole in their pockets?

The bottom line is - this looks a lot like a 'Small Bank' crisis. The last time this happened, the crisis sparked a sudden $300BN 'run' in small bank deposits...

Source: Bloomberg

Is The Fed 'hoping' for a controlled bank run this time - so as many small bank deposits are drained voluntarily before they are drained all at once in a panic (and the Reverse Repo facility is empty, unable to provide any cushion)?

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