Deposit growth has been robust across the industry, raising issues about what to do with the cash at both
But the increase has been considerably stronger at large banks, which receive most of the flows generated by tidal shifts in money markets, and have been impelled to shore up core funding by regulation (see charts).
In the most recent
A similar pattern appeared at the height of the financial crisis, when large banks experienced a 13% increase in deposits from early September 2008 through the end of that year, compared with a 3% increase among small banks.
Meanwhile, large banks have outpaced small banks in rebalancing toward core deposits, or deposits excluding time accounts with balances of $100,000 or more.
Large banks have traditionally relied on wholesale markets for a greater proportion of their funding than small banks. But the low-rate environment and a preference for cash among savers has made it easy for them to narrow the gap as regulators push for core accounts, which are typically more stable during a crisis.
(In addition to
Core deposits as a percentage of assets increased 14 percentage points from late 2007 to 60% in late July at large banks. During the same time, the ratio increased 10 percentage points to 65% at small banks.