Flight to Safety in the Regional Bank Crisis of 2023

55 Pages Posted: 25 May 2023 Last revised: 9 Jan 2024

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: 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

Caglio, Cecilia and Dlugosz, Jennifer and Rezende, Marcelo, Flight to Safety in the Regional Bank Crisis of 2023 (January 8, 2024). 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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