Rates Change Deposit Game, But Old Habits Stick: Interactive Graphic

Rock-bottom interest rates have made it easy for banks to anchor their funding in deposit types generally seen as stable, and to depend less on “hot money” in high-balance accounts.

Key differences persist, however, in funding profiles across asset classes. Small banks continue to rely relatively heavily on certificates of deposits. Midsize banks still lag in transaction accounts. (To customize asset categories in the graphic below, use the slider controls above the bar chart. To see data going back to the middle of 2002, click on the “Historical” tab to the upper left of the graphic. Text continues below.)

The surge in deposits since the financial crisis has disproportionately flowed to big banks, perhaps partly reflecting cash buildups at corporations, which tend to bank at large institutions.

Banks with less than $10 billion of assets have also reweighted toward transaction accounts, however. Such balances increased by 4 percentage points since the recession to 18% of total deposits among those institutions at March 31. (Small banks have been fighting to extend blanket insurance coverage of large noninterest transaction accounts, set to expire at the end of the year under the Dodd-Frank Act, because of concerns that without the coverage, such funds might abandon them for "too big to fail" institutions.)

Banks with $10 billion to $100 billion of assets have made little progress in transaction accounts, with such balances only increasing by roughly 2 percentage points since the recession to about 10% of their total deposits at March 31. Instead, money market and other savings accounts have leapt about 10 percentage points among this size group to 65% of total deposits.

The proportions of time deposits for different size categories have fallen in tandem, but, at 36% for banks with less than $10 billion of assets at March 31, the ratios remained high relative to large institutions. From one perspective, this gives small banks more room to further cut funding costs as CDs mature during a long period of low rates.

For now, banks’ deposit profiles appear to be far healthier than in the periods leading up to the recession. Whether that will remain the case when interest rates rebound and risk appetites return remains to be seen.