Nearly $47 billion has entered the US banking system in just one week as banks deploy new strategies to bring customers back.
Depositors added exactly $46.95 billion to American bank accounts in the week ending June 21st, according to new stats compiled by the Federal Reserve Economic Data (FRED) system.
The multibillion-dollar jump is thanks, in part, to new strategies designed to reverse deposit flight, reports Bloomberg.
Regional banks are borrowing an “eye-popping” amount of cash from the Federal Reserve, and are also relying on third party, brokered deposits compiled by little-known intermediaries to boost their bottom line.
And although the strategy may be boosting deposits, it will be costly in the long run.
“An analysis of quarterly regulatory filings for the 84 biggest banks… shows not only how much they were borrowing through those channels at the end of March, but also the toll that it was just starting to take on some of their earnings.
Those rising costs threaten to turn the most strained banks upside down: leaving them paying more to amass the cash they need than they earn by lending it out.”
The surge in brokered deposits is most visible at the Los Angeles-based PacWest Bancorp, which recorded a 1,774% increase in quarterly brokered deposits compared to a year earlier.
In addition to their expensive acquisition costs, brokered deposits are often referred to as “hot money” because they generally don’t sit in bank accounts as long as deposits that are acquired organically.
In total, the amount of deposits in US banks now stands at $17.34 trillion.
Although that number is up in the last week, it is significantly lower than the $18.10 trillion figure from one year ago.
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