By Saeed Azhar and Ann Saphir NEW YORK/SAN FRANCISCO (Reuters) - U.S. lenders are holding onto large piles of cash as insurance against a slowing ...
STORY CONTINUES BELOW THESE SALTWIRE VIDEOSNEW YORK/SAN FRANCISCO - U.S. lenders are holding onto large piles of cash as insurance against a slowing economy, continuing deposit outflows and looming tougher liquidity rules that could particularly impact mid-sized banks.
Overall U.S. banks' cash assets were $3.26 trillion as of Aug. 23, up 5.4% from the end of 2022. That was well above typical pre-pandemic levels, though down from the weeks immediately following the bank failures in March, Federal Reserve data shows. The SVB failure triggered a sudden dash for cash at banks, which within two weeks had bulked up cash assets to $3.49 trillion, the highest level since April 2022. That has pulled back since then, but is still almost twice as high as pre-pandemic.
Regional banks are shifting more"earning assets," such as those from lending activities, into cash or short-term securities, said Manan Gosalia, an analyst at Morgan Stanley, who covers regional banks. "As banks see further pressure on deposit costs, and as they hold higher levels of liquidity, we expect loan growth will continue to slow as we get to the end of this year," he said.Mid-sized banks are also worried about upcoming regulations, analysts said.
"Regulators are going to have a shorter fuse" for banks that have any gaps in managing their liquidity and the loans held on their books, said Peter Marshall, leader of EY's financial services liquidity advisory group. S&P estimated the value of these securities for FDIC-insured banks had more than $550 billion of unrealized losses on their available-for-sale and held-to-maturity securities as of June 30.
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