Small U.S. banks lose 1.9% of their deposits after SVB failure

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The numbers: Deposits at small U.S. banks fell by a steep $108 billion, or almost 2%, in the week after the collapse of Silicon Valley Bank, the Federal Reserve reported.

Business loans at both large and small banks rose in the week ended March 15, however.

Wall Street is watching the Fed report closely to see if a so-called credit crunch emerges following the failure of SVB and two other domestic banks. The emergency rescue of Switzerland-based Credit Suisse last weekend had added to the stress.

Key details: The decline in deposits at small banks reflected some investors moving their cash to what they viewed as safer institutions.

Deposits at larger banks rose by $120 billion to $10.8 trillion, indicating that most of the money leaving smaller institutions went to them.

Commercial and industrial loans at both large and small banks rose slightly last week. So far there’s little evidence of a developing credit crunch.

Deposits across all U.S. banks, including foreign-owned ones, fell by $53 billion last week.

The figures are unadjusted.

Big picture: The economy could suffer if banks reduce loans to businesses after the recent strain on the U.S. financial system. Lending is critical to economic growth.

The Fed itself warned the turbulence is “likely to result in tighter credit conditions for households and businesses and to weigh on economic activity, hiring, and inflation.”

Yet the Fed also cautioned it’s too early to determine the extent of the damage.

See also: U.S. bank sector ‘remains sound and resilient,’ council of top regulators says after Friday meeting

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