Flight to Safety in the Regional Bank Stress of 2023

56 Pages Posted: 25 May 2023 Last revised: 25 Feb 2025

See all articles by Cecilia Caglio

Cecilia Caglio

Board of Governors of the Federal Reserve System

Jennifer Dlugosz

Board of Governors of the Federal Reserve System

Marcelo Rezende

Board of Governors of the Federal Reserve System

Date Written: February 25, 2025

Abstract

Using confidential data on deposits at U.S. banks, we document a flight to safety by depositors to large banks in early 2023. In weeks of heightened stress, large banks experienced faster deposit growth than small and regional banks without raising deposit rates. Large banks’ deposit growth rates exceeded other banks’ even after accounting for characteristics associated with failures, including uninsured deposit funding and unrealized mark-to-market losses. Monthly data show that uninsured deposits rose faster at GSIBs relative to large non-GSIBs, but insured deposits grew slower. While retail and small business depositors also flew to safety, nonfinancial
corporations reacted more strongly.

Keywords: Bank deposits, bank runs, bank failures, interest rates, flight to safety

JEL Classification: G21, G28, G01

Suggested Citation

Caglio, Cecilia and Dlugosz, Jennifer and Rezende, Marcelo, Flight to Safety in the Regional Bank Stress of 2023 (February 25, 2025). Available at SSRN: https://ssrn.com/abstract=4457140 or http://dx.doi.org/10.2139/ssrn.4457140

Cecilia Caglio

Board of Governors of the Federal Reserve System ( email )

20th Street and Constitution Avenue NW
Washington, DC 20551
United States

Jennifer Dlugosz (Contact Author)

Board of Governors of the Federal Reserve System ( email )

20th Street and Constitution Avenue NW
Washington, DC 20551
United States

Marcelo Rezende

Board of Governors of the Federal Reserve System ( email )

20th Street and Constitution Avenue NW
Washington, DC 20551
United States

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