Flight to Safety in the Regional Bank Crisis of 2023
55 Pages Posted: 25 May 2023 Last revised: 9 Jan 2024
Date Written: January 8, 2024
Abstract
Using confidential weekly data on 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 remain higher than other banks’ even after accounting for characteristics associated with failures during the period, including uninsured deposit funding and unrealized mark-to-market losses. Banks with the largest deposit outflows did not recover those funds and reduced lending over the following months.
Keywords: Bank deposits, bank runs, bank failures, interest rates, flight to safety
JEL Classification: G21, G28, G01
Suggested Citation: Suggested Citation